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Chad Oberg
Chad Oberg, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 174
Experience:  10 + years of accounting and tax experience, financial statements and business planning
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I may sell my business in a month or so, how much are the capital

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I may sell my business in a month or so, how much are the capital gains taxes in California and with the IRS. How can I lower the capital gains tax. can I invest in another business to lessen the tax, how do I shelter the profit so as not to pay any more tax than necessary.
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Chad Oberg :

You will want the sale to complete before year-end since capital gain rates reset on January 1, 2011 and go back to pre-bush rates. Federal rates are currently 15% and California 9.55%. The federal rate will reset to 20%. You will want to make sure you count all expenses associated with the sale as basis in the asset to diminish your capital gain. The above is considering that you are selling the stock of the company. Many new investors will not buy the stock of a company. Rather, they will buy the assets of the company. Here is were you want to be extremely careful. When you sell the assets of a company, you will be required to segregate the purchase price (sales price) of the assets out into different categories such as equipment, building, etc.... and also any remaining will be allocated to goodwill. The trick here is some components will carry an ordinary recapture income tax rate due to recapture, other assets will receive capital gain treatment. You will want to consult with a tax advisor, CPA, and allow them to assist in forming the contract with the purchase. The new owner and the seller are both required to file a form with the IRS upon sale of assets (Form 5494) that indicates the different classes of assets and sets in stone the treatment that each party will have regarding the gain for the seller and the structure of the new assets of the buyer.

Chad Oberg :

Another have a portion of the sales price allocated to consulting for a given period after the sale. This will provide an opportunity to continue to run a business (through a Schedule C on your tax return) and deduct expenses that you have within the following period. At the end, you will want to be careful not to get to agressive and keep the contract reasonable. If you shelter the entire sale and the asset book value or stock wasn't even close to the amount the transaction may be an indicator of a problem to the taxing agencies. I would still recommend looking up a great CPA to assist you in the matter. There are other ways to assist and the planning can be quite complex depending on the sale and the nature of the business. If you have any further questions, please do not hesitate to contact me. Regards, XXXXX CPA

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FYI, the CA state tax rate can fluctuate also depending on your tax bracket by 1%.


Thank you again.

Customer: replied 6 years ago.
If the Sale of the Business does take place this year, the Buyer wants to pay me 25% now and 25% each year for the next three years. Is the capital gains tax due this year for the whole amount or do I pay the gains tax each year as the buyer makes a payment.



You can structure the deal as an installment sale and recognize a portion each year.



If you have any further questions, please do not hesitate to contact me. Or, if the answer is adequately, please accept and conclude this correspondence.


Tax advice given in the above dialog is not intended for the purposes of avoiding tax or penalties. Guidance is strictly for the purpose of the addressee and is not for widespread distribution.


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