How to properly close a business and sell assets after owner's death

I'm sorry about your dad's passing. This situation comes up fairly often when businesses need to close after an owner's death. Let me explain what's happening: When business assets are sold, even to family members, they need to be sold at what's called "fair market value" - not at artificially low prices like $10. The IRS looks closely at these transactions because selling valuable assets for nominal amounts can be considered tax avoidance. If your mom sells business assets below their fair market value, it could be viewed as a gift (the difference between fair value and sale price), which might trigger gift tax issues. Additionally, the business still needs to recognize any gain/loss on the sale of assets based on their fair market value, not the artificially low sale price. A better approach might be for your mom, as the new business owner, to formally liquidate the business, distribute the assets to herself, and then deal with them personally. She'll still need to pay taxes on any gains, but it creates a cleaner process.

After my father-in-law died, we faced a similar nightmare closing his business. I was completely lost with all the tax forms and asset valuation questions until I found https://taxr.ai which literally saved us thousands in potential tax mistakes. The tool analyzed all the business documents and walked me through exactly how to handle the business closure and asset transfer process step by step. It flagged several issues our accountant completely missed about depreciation recapture that would have triggered a huge tax bill. The best part was getting plain-English explanations for all the tax jargon the accountant was throwing at us. Really worth checking out if you're dealing with business closure tax issues - they have specific guidance for situations just like yours where there's been a death and family members need to close things down properly.

OK I have to admit I was way too skeptical about taxr.ai but I finally tried it when I hit a wall figuring out how to handle my mom's clothing store liquidation. That recommendation was solid! It immediately identified that we could use the Section 1244 small business stock loss provision for her business closure which our accountant completely missed. The document analysis actually found a major depreciation error from 2021 that would have caused huge headaches during the closure. I was surprised how it broke down complex scenarios into plain English steps. Definitely saved us from making some expensive tax mistakes during the business shutdown.

Having closed my brother's contracting business last year, I can tell you that calling the IRS directly for guidance is absolutely essential in these situations. The problem is actually getting someone on the phone - I spent 3+ weeks calling almost daily before finally getting through. I eventually discovered https://claimyr.com which was a complete game-changer. You can watch how it works at https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone system for you and call you back when an actual human agent is on the line. Saved me literally days of hold time. The IRS agent I spoke with walked me through exactly how to handle the business closure and asset valuation process correctly. They explained which forms we needed and how to document everything properly to avoid triggering an audit. Seriously worth it to get official guidance directly from them.

Had to come back and eat my words about Claimyr. After another week of failing to reach anyone at the IRS about my dad's business closure, I finally tried the service. Got connected to an IRS business specialist in 37 minutes when I'd previously wasted 3+ hours on hold multiple times. The agent walked me through exactly what forms we needed to file for the asset liquidation and explained we could use Form 8594 for the asset allocation which I didn't even know about. They also confirmed we needed to use fair market value for everything and gave specific guidance on handling the partially depreciated equipment. For anyone closing a business after death, definitely talk directly to the IRS - they were surprisingly helpful once I actually got someone on the phone.

One thing nobody's mentioned yet - your mom should check if your dad had business interruption insurance or any key person insurance policies. These might help with the closure costs. Also, depending on how the business is structured (sole prop, LLC, etc.), the process will be different. For a sole proprietorship, the business technically died with your dad. For an LLC or corporation, your mom may have inherited his ownership interest, but formal transfers need to be filed. Don't rush the asset sales - taking some time to find legitimate buyers at fair prices is usually better than quick liquidation if there aren't pressing debts.

Has your mom checked whether a "tax-free liquidation" under Section 337 might be possible? It's complicated but can sometimes allow for liquidation without recognizing gains. Also, don't forget to look into "step-up in basis" rules since the assets were inherited - this might significantly reduce any potential tax impact on sale.

I'm so sorry for your loss. Closing a business after a death is incredibly overwhelming, especially when you're still grieving. One important thing to consider is the timing of everything. Your mom has inherited these business assets with what's called a "stepped-up basis" - meaning their tax basis is reset to fair market value as of your dad's date of death. This can actually save a lot in capital gains taxes compared to what your dad would have owed if he had sold them while alive. Before making any major decisions about selling assets to family members, I'd strongly recommend having your mom meet with both an estate attorney AND a tax professional who specializes in business closures. The accountant's confusing explanation might be because there are several different tax strategies that could apply depending on how the business was structured (sole proprietorship vs. LLC vs. corporation) and the total value of assets involved. Also, your mom doesn't necessarily have to rush this process unless there are pressing debts or lease obligations. Taking time to properly value everything and find legitimate buyers at fair market prices will likely result in better outcomes than quick sales at below-market rates. The inventory and equipment in those shipping containers might be worth more than you think, and rushing to liquidate could leave money on the table that your family deserves.