Sold business, owner finance income

I recently sold my small business and am not clear how one would enter a couple of notes that I've carried back for the buyer.

Note 1 - let's say $1M, 6% interest accrues for two years without payments, then is paid to me by a monthly schedule for the next 96 months (6% interest through the remaining term as well).

Note 2 - another $1M, 6% interest accrues for the first five years without payments, then is paid "interest only" to me by a monthly schedule for the next 60 months (6% interest through the remaining term as well). Balloon payment is paid at the end of the (total) 10 year period.

Any help in getting these "special" receipts entered would be MOST appreciated. Thanks in advance!

Comments

dan royer's picture

I believe that you'll have to calculate these series of returns on the side and enter them as special receipts with appropriate tax consequences, much like you seem to already know. I've asked Larry Kotlikoff to take a look at this and see if he can offer any other suggestions. I believe the tricky part is just doing the side calculation and then making sure that you enter in nominal dollars, since I believe your calculations will not account for inflation going forward.