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  1. #1
    Lunk1's Avatar
    Lunk1 is offline aka "JOB"
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    Selling a business without getting the tax shaft

    Ok TR or any other bean counters out there. How does one sell a business without having to pay tons of money in capital gains tax?

    Example: Subject wants to retire and sell all of their inventory and equipment to a potential buyer. How could this be accomplished without losing tons of money to the man?

  2. #2
    MuscleInk's Avatar
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    Quote Originally Posted by Lunk1
    Ok TR or any other bean counters out there. How does one sell a business without having to pay tons of money in capital gains tax?

    Example: Subject wants to retire and sell all of their inventory and equipment to a potential buyer. How could this be accomplished without losing tons of money to the man?
    Lol....took you long enough to post that question.

  3. #3
    Lunk1's Avatar
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    Quote Originally Posted by MuscleInk View Post
    Lol....took you long enough to post that question.
    Kicked it around all day. You know me...

  4. #4
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    Quote Originally Posted by Lunk1

    Kicked it around all day. You know me...
    I'm sure you haven't stopped thinking about it all day - but that's one of many things I respect about you.

  5. #5
    Rwy's Avatar
    Rwy
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    I always think twice about posting things regarding taxes. You never know who is watching.


    Maybe a discount to the buyer for a cash sale?

  6. #6
    MuscleInk's Avatar
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    Quote Originally Posted by Rwy
    I always think twice about posting things regarding taxes. You never know who is watching.

    Maybe a discount to the buyer for a cash sale?
    Big brother is always watching. Lol

  7. #7
    Lunk1's Avatar
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    Quote Originally Posted by Rwy View Post
    I always think twice about posting things regarding taxes. You never know who is watching.


    Maybe a discount to the buyer for a cash sale?
    Not looking to do anything illegal but I;m sure their are loopholes or methods of structuring that can help a person avoid paying at the highest rate or all at once.

  8. #8
    Rwy's Avatar
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    **** them they rape us. You should try and beat the system. I read a study today at a hedge fund companies office that 60% of Ny (metro) income goes to tax....

  9. #9
    Rwy's Avatar
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    Quote Originally Posted by MuscleInk View Post
    Big brother is always watching. Lol
    LOL Ive been audited twice I know all about it

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    Ugh. That's unpleasant.

    Someone go get TR out of the softball thread and drag him in here.

  11. #11
    Rwy's Avatar
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    The first time was bad luck. The owner of the company got nabbed and ratted everyone out. It was a independent delivery driver and there was an expense to package what we delivered. Most of the driver wrote the expense off but bc we did not issue a 1099 to the person packaging you cannot write that off.

    I wrote off miles and they broke out a hagstrom and started checking to see if my mileage was correct. It was crazy. The guy pretended to build rapport with me to put my guard down and then eventually started slamming me wit questions.

    Cut me a break and didnt go back to previous years

  12. #12
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    Easy. Just have plane tickets and a resident Visa ready for Europe prior to sale.
    ~ PLEASE DO NOT ASK FOR SOURCE CHECKS ~

    "It's human nature in a 'more is better' society full of a younger generation that expects instant gratification, then complain when they don't get it. The problem will get far worse before it gets better". ~ kelkel

  13. #13
    Lunk1's Avatar
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    Quote Originally Posted by austinite View Post
    Easy. Just have plane tickets and a resident Visa ready for Europe prior to sale.
    Hah...Jamaica maybe.

  14. #14
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    Quote Originally Posted by Lunk1 View Post
    Hah...Jamaica maybe.
    ~ PLEASE DO NOT ASK FOR SOURCE CHECKS ~

    "It's human nature in a 'more is better' society full of a younger generation that expects instant gratification, then complain when they don't get it. The problem will get far worse before it gets better". ~ kelkel

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    I've sold a couple and got screwed every time by the time u pay CPA's and Attorneys thn taxes.. Sux! If I didn't have family here I would follow Austin's protocol. I love European women so I would spend some good time in Prague'

  16. #16
    Times Roman's Avatar
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    How to sell without paying capital tax gains?

    1) Hire Roman at $350/hour - don't laugh, that's a reasonable price for what you are about to get

  17. #17
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    Quote Originally Posted by Times Roman View Post
    How to sell without paying capital tax gains?

    1) Hire Roman at $350/hour - don't laugh, that's a reasonable price for what you are about to get
    You're right...that's nothing compared to the tax amount

  18. #18
    Times Roman's Avatar
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    ...and if you cheap bastads are having to look for aluminum cans in the garbage outside the gym to try and cover my fees, then I'll give you some ideas.

    1) You have to understand the tax basis of the capital asset. Say you purchase real asset, Building #1, for $100,000. This is your tax basis. Now say you have been slowly writing off this asset with a depreciable life of 40 years, which amounts to a tax write off of $2,500 per year, and you've had the asset for 10 years before selling. You have therefore written down your asset 25% or $25,000. Your current tax basis is now $75,000. You now sell Building #1 for $200,000. What are the tax consequences?

    Answer:
    Since you have written off $25k against ordinary taxable income (typically a higher income tax rate than a capital gains tax rate), you will have to pay ordinary income tax on the $25k, and capital gains tax on the other $100k.

    Inventory and depreciable business property are NOT considered for capital gains tax, and when sold, are taxed as ordinary income (at the higher rate).

    The only way to avoid tax is to avoid taxable income/gains at the time of the sale. There are ways to minimize this, but since a vague question, then only a vague answer.

    Quite often, sellers will break up the company prior to the sale. For example, they will set up a holding company that will own real property and buildings, and the holding company will "buy" it from the core business. There are intricacies in how to do this and minimize taxable income to the core business, and this is usually set up early on, not close to the time of sale. The core company will then rent from the holding company, which is good due to the recharacterization of the income that is derived (from ordinary income - high tax rate - to rental income - a lower tax rate). So the new buyer will only be purchasing the core business, and thereby avoiding all capital gains to the seller.

    Make sense, right?

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