Spouse A owns a CPA practice and dies. Spouse B sells practice to another firm (no fixed assets or inventory).

Does she get in step-up in basis for goodwill associated with the client list? One of us says yes, one of us says no.

I will not even venture a guess. That is a REAL complex tax question that is really beyond the scope of this forum.

Maybe ebaines can address this, but it is beyond my level of expertise.

I would answer the question with a question. If you had to prepare an estate return would you include that value as an asset? The estate instructions say you have to account for goodwill in the valuation. Given that generality I would say yes you could step-up the basis. Definitely need to do your research on this one.

Have researched and researched and that is why the problem lies. One of us says the business value is stepped up on the inheritance return based upon their research. The other of us says without the CPA owner, the business has no real value- again based upon research.

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Originally Posted by dhrnrcpa

Have researched and researched and that is why the problem lies. One of us says the business value is stepped up on the inheritance return based upon their research. The other of us says without the CPA owner, the business has no real value- again based upon research.

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If a third party is willing to pay for the business, it must have some value. What is that value attributable to if not goodwill?