Mathias has been the sole proprietor of a clothing store for many years. He inte
ID: 2719576 • Letter: M
Question
Mathias has been the sole proprietor of a clothing store for many years. He intends to retire after holding a "liquidation sale". He wants to avoid ordinary income from the sale of the business inventory, so he shuts down the store for one month and then begins the liquidation sale. Mathias tells you (his tax return preparer) to report the liquidation sale proceeds as capital gain because he was no longer using those assets in a business at the time of the sale, but was holding them for investment. Evaluate the propriety of Mathias's plan. Justify your answer
Explanation / Answer
Mathias wanted to minimize her tax liability by way of shifting proceeds from liquidation sale to capital gains. Her Liquidation sale in my opinion (assuming) will include Display, Clothing, Shelving, Cleaning equipments etc.