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What happens when you SELL a B&B?

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JunieBJones (JBJ)

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Do you know what happens when you SELL a B&B?
If you sell the B&B as an operational B&B and sell it turnkey with all furnishings and business intact?
What taxes will you pay?
Is there a benefit to selling the business equipment (ie guest furnishings) separate? Not giving a choice or anything, but selling the inn for (an easy number for an example) $500,000 and the guest furnishings for $15,000? So total sale price is $515,000?
Not breaking down the real estate from the business sale, just itemizing the furnishings as they convey?
Or any other information you would like to share please.
 

briarrosebb

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Hi, June -
During the sales process, the buyer and seller should agree on how the purchase price is allocated. I believe there is even a federal tax form involved. The primary importance of the allocation is what taxes will be levied on the buyer going forward. Each of these types of property have different tax characteristics for the buyer.
The allocation is between:
  • real property (which the buyer will split between land and building... land not being depreciable for income tax purposes)
  • intangible property (goodwill, names, websites, databases, etc)
  • tangible personal property (furniture, computers, appliances... anything not fastened to the real property). Some jurisdictions tax the value of personal property, especially when used in business.
  • supplies (linens, toilet paper, food, cleaning supplies, etc)
From the point of view of the seller, you will have a certain tax basis (i.e., your original cost less depreciation) for each of these assets, and the tax rules and rates will vary by type of asset. As seller of a B&B, you pay capital gains income taxes on the sale of assets to state and federal governments, should your proceeds exceed your depreciated cost. Also, as seller you may owe "sales tax" to state and local jurisdictions on the personal property and supplies you sell to the buyer.
This is way simplified and I am no expert, but hopefully it's helpful.
 

EmptyNest

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It all depends on the situation. I know some folks who sell the whole kit and kaboodle. I also know others who have sold the property and the business separately. I think you best consult an expert on this one. No matter what you are GOING TO HAVE TO PAY TAXES. I have had friends who sold this place to us tell me they had to PAY BIG TIME!!!! Of course I think someone mentioned that the 2 year rule of not being open as a B & B no longer applies...this is something I will have to look into further. As we will have had this placed closed at least 3 years when we will attempt to put it on the market...so I guess we will be stuck paying back depreciation etc....I just don't even want to know right now:-(
 

JunieBJones (JBJ)

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It is more to solve an argument on the sale than anything else. I know what happened when we bought this place, but being on the other side of the transaction is different. Thanks!
PS Forgot to mention Catlady they are in the planning stages of a small amphitheater in the park across the street, perfect for this business! There is no turning back now...the next owners will have it made in the shade.
I was just telling someone the other day that the prev owners did weddings, dinners, luncheons, showers etc and THAT was their main revenue stream - so all options will be available for the future.
 

swirt

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JBJ, are you listing with a realtor specific/experienced in B&B's or just an "ordinary" realtor? I'm wondering how much help a B&B realtor would be with these kind of questions?
 

Morticia

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When we bought, we had everything broken out, because we bought as a company, not as individuals, so that was how the tax lawyer said to do it. Because one company bought the real estate and another runs the business, we had things differentiated.
Forgot to say that it was beneficial for the taxes as well, as there is a real estate transfer tax here.
 

JunieBJones (JBJ)

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We are not sure what route we will take when we sell, when the time comes. We did use a B&B broker when we bought this place and were not at all pleased. I shoulda been hard nosed to get what I needed. Aspirings never are, they are rose colored goggle-headed.

I know what we did when we purchased and since the po's would try to squeeze blood from a turnip, I am sure the way they sold it to us they got the most bang for their buck, so to speak. I plan to follow the same format.
They sold us the inventory separated but was required, down to every last indiv logo'd soap. (Don't get me started! ha ha) They only owned this place for 2 years, and were nasty. I actually want this to be a continued success and will do all in my power to make it a happy transaction.
 

Morticia

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We are not sure what route we will take when we sell, when the time comes. We did use a B&B broker when we bought this place and were not at all pleased. I shoulda been hard nosed to get what I needed. Aspirings never are, they are rose colored goggle-headed.

I know what we did when we purchased and since the po's would try to squeeze blood from a turnip, I am sure the way they sold it to us they got the most bang for their buck, so to speak. I plan to follow the same format.
They sold us the inventory separated but was required, down to every last indiv logo'd soap. (Don't get me started! ha ha) They only owned this place for 2 years, and were nasty. I actually want this to be a continued success and will do all in my power to make it a happy transaction.
.
JunieBJones (JBJ) said:
We are not sure what route we will take when we sell, when the time comes. We did use a B&B broker when we bought this place and were not at all pleased. I shoulda been hard nosed to get what I needed. Aspirings never are, they are rose colored goggle-headed.

I know what we did when we purchased and since the po's would try to squeeze blood from a turnip, I am sure the way they sold it to us they got the most bang for their buck, so to speak. I plan to follow the same format.
They sold us the inventory separated but was required, down to every last indiv logo'd soap. (Don't get me started! ha ha) They only owned this place for 2 years, and were nasty. I actually want this to be a continued success and will do all in my power to make it a happy transaction.
I found it odd what the PO's did not consider that we had paid for with the purchase and wanted to be reimbursed for...anything on the web they wanted money back for the months they would not be using...domain reg, directory listings (the ones they DID renew), etc. Hello, people, we just paid you a gazillion dollars and you want $247 back?
 

JunieBJones (JBJ)

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We are not sure what route we will take when we sell, when the time comes. We did use a B&B broker when we bought this place and were not at all pleased. I shoulda been hard nosed to get what I needed. Aspirings never are, they are rose colored goggle-headed.

I know what we did when we purchased and since the po's would try to squeeze blood from a turnip, I am sure the way they sold it to us they got the most bang for their buck, so to speak. I plan to follow the same format.
They sold us the inventory separated but was required, down to every last indiv logo'd soap. (Don't get me started! ha ha) They only owned this place for 2 years, and were nasty. I actually want this to be a continued success and will do all in my power to make it a happy transaction.
.
JunieBJones (JBJ) said:
We are not sure what route we will take when we sell, when the time comes. We did use a B&B broker when we bought this place and were not at all pleased. I shoulda been hard nosed to get what I needed. Aspirings never are, they are rose colored goggle-headed.

I know what we did when we purchased and since the po's would try to squeeze blood from a turnip, I am sure the way they sold it to us they got the most bang for their buck, so to speak. I plan to follow the same format.
They sold us the inventory separated but was required, down to every last indiv logo'd soap. (Don't get me started! ha ha) They only owned this place for 2 years, and were nasty. I actually want this to be a continued success and will do all in my power to make it a happy transaction.
I found it odd what the PO's did not consider that we had paid for with the purchase and wanted to be reimbursed for...anything on the web they wanted money back for the months they would not be using...domain reg, directory listings (the ones they DID renew), etc. Hello, people, we just paid you a gazillion dollars and you want $247 back?
.
Bree said:
I found it odd what the PO's did not consider that we had paid for with the purchase and wanted to be reimbursed for...anything on the web they wanted money back for the months they would not be using...domain reg, directory listings (the ones they DID renew), etc. Hello, people, we just paid you a gazillion dollars and you want $247 back?
Ours let everything lapse, now that's good innkeeping for you! GRRRRR! Yes, paid them a ton of money (way too much after we found out their lies about the revenue) and wanted $200 for some dishes they forgot to take with and left here or something. >SMASH< STUFF IT.
 

EmptyNest

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We are not sure what route we will take when we sell, when the time comes. We did use a B&B broker when we bought this place and were not at all pleased. I shoulda been hard nosed to get what I needed. Aspirings never are, they are rose colored goggle-headed.

I know what we did when we purchased and since the po's would try to squeeze blood from a turnip, I am sure the way they sold it to us they got the most bang for their buck, so to speak. I plan to follow the same format.
They sold us the inventory separated but was required, down to every last indiv logo'd soap. (Don't get me started! ha ha) They only owned this place for 2 years, and were nasty. I actually want this to be a continued success and will do all in my power to make it a happy transaction.
.
JunieBJones (JBJ) said:
We are not sure what route we will take when we sell, when the time comes. We did use a B&B broker when we bought this place and were not at all pleased. I shoulda been hard nosed to get what I needed. Aspirings never are, they are rose colored goggle-headed.

I know what we did when we purchased and since the po's would try to squeeze blood from a turnip, I am sure the way they sold it to us they got the most bang for their buck, so to speak. I plan to follow the same format.
They sold us the inventory separated but was required, down to every last indiv logo'd soap. (Don't get me started! ha ha) They only owned this place for 2 years, and were nasty. I actually want this to be a continued success and will do all in my power to make it a happy transaction.
I found it odd what the PO's did not consider that we had paid for with the purchase and wanted to be reimbursed for...anything on the web they wanted money back for the months they would not be using...domain reg, directory listings (the ones they DID renew), etc. Hello, people, we just paid you a gazillion dollars and you want $247 back?
.
Bree said:
I found it odd what the PO's did not consider that we had paid for with the purchase and wanted to be reimbursed for...anything on the web they wanted money back for the months they would not be using...domain reg, directory listings (the ones they DID renew), etc. Hello, people, we just paid you a gazillion dollars and you want $247 back?
Ours let everything lapse, now that's good innkeeping for you! GRRRRR! Yes, paid them a ton of money (way too much after we found out their lies about the revenue) and wanted $200 for some dishes they forgot to take with and left here or something. >SMASH< STUFF IT.
.
I did not know your PREVIOUS owners personally, but from what others in the association told me..they were ..well what can I say....you know!!!
 

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