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Jon Andrews
Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 3118
Experience:  I deal with all levels of tax planning and controversy - from the ordinary to the complex.
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How do I avoid taxes when selling my business

Customer Question

I plan on selling my insurance business to my daughter and her husband. We would both prefer to pay as little tax as possible. If I gift the business to them, how can I accept payment and not pay taxes on the money.?
Submitted: 11 years ago.
Category: Tax
Expert:  Jon Andrews replied 11 years ago.

You are opening a can of worms if you try to "sell" it by "gifting" it and having her "gift" payments back to you. Your best course of action is to agree to a sales price that you both can live with and treat that amount as a sale/purchase. This will provide certain benefits to each of you. Additionally, in most insurance businesses, the primary asset is "goodwill". The sale of goodwill generally results in a capital gain which is taxable at a maximum rate of 15%.


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Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 3118
Experience: I deal with all levels of tax planning and controversy - from the ordinary to the complex.
Jon Andrews and 2 other Tax Specialists are ready to help you
Customer: replied 11 years ago.
Reply to Jon Andrews's Post: Do you have any suggestions on how I can save on taxes when selling my business to my daughter. What are the tax consequences of selling it over a period of 150 months?
Expert:  Jon Andrews replied 11 years ago.

Properly structured, you should be able to achieve a situation where you pay tax only as and when you receive payments. You will need to consider part of the payments as interest which will potentially be taxed at a higher rate. But the only other legal alternative would be for her to pay you "retirement payments" which are fully taxable as ordinary income to you.


In my opinion, the best method is for you to sell the goodwill which results in you paying tax at a maximum rate of 15% as you receive the principal payments.


You should be aware that, if she pays retirement payments, they are fully deductible to her (if properly structured). So, since this is a family deal, you should put all of the figures together and see how it comes out the best for everyone. Part of the answer will depend on future tax rates for both you and her - so there is some guesswork involved.


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Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 3118
Experience: I deal with all levels of tax planning and controversy - from the ordinary to the complex.
Jon Andrews and 2 other Tax Specialists are ready to help you
Customer: replied 11 years ago.
Reply to Jon Andrews's Post: am I required to pay soc security on retirement payments?
Customer: replied 11 years ago.
Reply to Jon Andrews's Post: Do I have to pay Soc Security tax on retirement payments, if over a certain amount.
Expert:  Jon Andrews replied 11 years ago.

If properly structured, you should be able to avoid paying social security taxes on the payments.


jon

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