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# When selling a business, how can I estimate the (leftover)

### Customer Question

When selling a business, how can I estimate the (leftover) earnings after taxes?
Bought a business for 1.2m with 1m bank loan (loan balance is now 700k). May be selling at 1.7m. So is this how to roughly calculate? 1.7m - 700k = 1m cash. Then to pay taxes of 1.7m-1.2m = 500k gains @ 25% = 125k. So 1m cash - 125k tax = 875k remaining cash? I am sure there are different tax rates based on company structure, stock, etc but is this at least generally the correct formula?
Also, when I say 1.2m (it means price of 900k plus 300k inventory) and when I say 1.7m (it means price of 1.4m plus 300k inventory), this doesn't change anything (for the most part) right?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

Several issues...

First of all the loan will NOT affect your tax liability.
When you took a loan - proceeds were not included into your income - correct? That is because you were expected to pay that amount back. So when eventually you pay it back - that is NOT deductible.

Second - taxable income is calculated differently whether you sell shares of the corporation or you are selling assets.
If you purchase shares of corporation for \$1.2m and sell shares for \$1.7m - your taxable gain is the difference \$.5m.

Assuming you held shares for one year or longer - and the gain will be long term gain taxes at reduced rate - most likely 20% plus additional AMT and Net investment tax - total about 28%.

Expert:  Lev replied 1 year ago.

The treatment would be different if you have asset sale - not stock sale.