Covenant not to compete S corp Sale

You're saying it's the S-Corp which got the money for the covenant not to compete, as opposed to an individual shareholder doing the selling and getting that income on his own 1040?

I'd use the "other income" line at screen 13, code 5.  You can then describe it as "covenant not to compete," and the statement will show up on the S-Corp return.

The S Corp was sold. One shareholder. I am handling this as an asset sale. The sales price is $650,000 as follows: Class IV $10,000 Supplies inventory, Class V $66,500 FF&E, Class VI $281,750 Client Files and $10,000 Covenant not to compete and Class VII $281,750 Goodwill. Do I report all of these sales on the S Corp return that in turn will pass through to the one owner on the K-1? Where do I enter in Lacerte? I really need help. Ugh.....

You say the corporation was sold but you also say the assets were sold.  Which is it?

Sounds like you are doing a stock sale with a 338 election to treat as an asset sale.  This is a tough job.  You need to have all of the agreements, etc.  The covenant probably is with the selling shareholder and the purchaser.  It is probably not reportable on the 1120S.  the rest of the stuff is.

For starters, the sale of Inventory gets reported where all sales of Inventory get reported.  FF&E go on 4797, etc.

The assets of the S corp were sold. A medical practice with one doctor (s corp status 7/2006) was sold to an individual doctor and the corporation was dissolved/liquidated and Form 966 was filed. Should the sale of all assets be reported on the S corp return. Not sure where? Thanks for your help to date!

You get to Form 4797 through screen 15 Dispositions. 

You also need to file form 8594 (Asset acquisition statement) showing the allocation of sales price by class as you described.  That is screen 58 in the miscellaneous forms.

The covenant not to compete was part of the assets sold by the corporation (Class VI).  Then the corporation did a complete liquidation.  I would include the covenant on the corporate return, and report the whole distribution as a liquidation distribution.

The individual then reports capital gain or loss on their return, depending on their basis.

I think it would be unusual for the selling corporation to enter in to a covenant not to compete.  Usually these are entered into with individuals.  If so, the income from the covenant goes on the doc's personal return, not on the 1120S. The sale of corporate assets gets reported on the 1120S.