TN 13 (11-12)

RS 01803.130 Computing Net Earnings from Self-Employment (NESE) for the Year the Business is Sold

When determining NESE after selling a business, include income that comes from selling inventory or stock in gross receipts. Exclude income received from items that are not inventory; e.g., fixtures, goodwill, real estate.

When an individual sells his or her business, but retains ownership of accounts receivable:

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  Include collections in the year received, if you use the cash basis method of accounting.

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  Exclude collections if using the accrual method, since collections is NESE in the year of the sale.