It really depends on what you determined with the buyer. Capital gains (sales price - purchase price) is only applied to tangible assets.

If you negotiate a total price for the business, you and the buyer must agree as to what portion of the purchase price applies to each individual asset, and to intangible assets such as goodwill. The allocation will determine the amount of capital or ordinary income tax you must pay on the sale. It will also have tax consequences for the buyer.

What is good for the tax picture for the seller is often bad for the buyer and vice versa, so the allocation of price to various components of the deal is frequently an area for negotiation and compromises.

The taxable amount at issue is your profit: the difference between your tax basis and your proceeds from the sale. Your tax basis is generally your original cost for the asset, minus depreciation deductions claimed, minus any casualty losses claimed, and plus any additional paid-in capital and selling expenses. Your proceeds from the sale generally means the total sales price, plus any additional liabilities the buyer takes over from you.

As the seller, you will probably want to allocate most, if not all, of the purchase price to the capital assets that were transferred with the business. You want to do that because proceeds from the sale of a capital asset, including business property or your entire business, are taxed as capital gains.

Under current law, long-term capital gains of individuals are taxed at a significantly lower rate than ordinary income. In fact, if you've held the asset for longer than 12 months, the maximum tax on long-term capital gains is 15 percent for qualifying taxpayers. (Taxpayers in the 10- and 15-percent tax brackets pay zero percent.)

If your business is a sole proprietorship, a partnership, or an LLC, each of the assets sold with the business is treated separately. (A corporation can also take this route, but it also has the option of structuring the sale as a stock sale.) So, the formula described above must be applied separately to each and every asset in the sale (you can lump some of the smaller items together, however, in categories such as office machines, furniture, production equipment etc.). Certain assets are not eligible for capital gain treatment; any gains you receive on that property are treated as ordinary income and taxed at your normal rate.

After the sale, the buyer will be able to depreciate or amortize most of the assets that were transferred. Because different types of assets are depreciated differently under IRS rules, the buyer is going to want to allocate more of the price toward assets that can be depreciated quickly, and less of the price to ones that must be depreciated over 15 years (such as goodwill or other intangibles) or even longer (such as buildings) or not at all (such as land).

That's the basic story. But things are never that simple with the IRS. There are a number of qualifications to the rules, and issues that present planning opportunities for sellers (and buyers) of businesses.

You should consult a CPA.