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PDtax
PDtax, CPA firm owner
Category: Tax
Satisfied Customers: 1995
Experience:  32 years tax experience, including four years at a Big 4 firm.
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Hello, whoever! If I sell my business, Total sales 3 Million,

Resolved Question:

Hello, whoever!

If I sell my business, Total sales 3 Million, annual costs 2 Million, i.e 1 Mio gross profit, for 5 Mio, what will be considered the Capital Gain?
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.

PDtax :

Welcome to the site. I'm PDtax, and will be helping you today.

PDtax :

Sales of a business can be involved, or simple. Let's start with simple.

PDtax :

You sold your ownership of your business (probably stock in a corporation) for $5 million. Subtract your original and any subsequent investments in the company (started it with $10,000, perhaps), and that could be the simple math for determining the capital gain on the sale.

PDtax :

If you sold, and the purchaser allocated the sale price to the company assets, your sale will have to match that allocation. Your sale contract would have specified that allocation.

PDtax :

So, a review of the contract is in order. If there was no allocation of sale proceeds, $5 million minus the investment you made.

PDtax :

I see you have entered the chat. Is there anything else you need?

Customer:

Thanks. Wife and I started the business 10 years ago. Small sales initially, of consultancy services, finding homes for people, not like a realtor, more like a welcome service. Got up to staff of 20, several cars, lots of computers, rented and improved premises, etc. Honestly, haven't kept track of the accumulated investment, just know each year what it cost to run the company, salaries, etc, then what the profit was.

Customer:

I mean to ask, can I accumulate these investments? If we invested 100K in Year 1, and 500K in Year 8, etc,

Customer:

is that an accumulated investment of 600K?

PDtax :

yes you can. the total investment is what is used.

Customer:

AH - that is my answer - thanks!!

PDtax, CPA firm owner
Category: Tax
Satisfied Customers: 1995
Experience: 32 years tax experience, including four years at a Big 4 firm.
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