Selling financial capital

Selling Your Business – A Tool To Reduce Capital Gains Taxes  September 13, 2010 – 02:57 pm
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“I would rather expire at my desk than to sell my business and pay Uncle Sam one dime in taxes.” How many owners that have paid their fair share of taxes for twenty years of building their business feel this way? The tax bite is the single biggest factor in an owner’s reluctance to sell his/her company.

I have previously written articles discussing various aspects of transaction structures to minimize taxes. As a result, I am often contacted by a panicked seller that is a week from closing his business sale as he looks in disbelief at his accountant’s spreadsheet detailing the tax burden of his impending sale.

Recently, the seller of a Sub Chapter S Corporation with an $8 million transaction value contacted me. The tax basis was below $200, 000 and $4 million of the transaction value was the assumption of debt. When the dust settled, he was looking at a capital gains tax liability of a staggering $965, 000 while only receiving the remainder of proceeds after the assumption of debt. The assumption of debt is considered as part of the capital gain for tax purposes.

The owner sent his accountant’s spreadsheet to me and since I am not a tax accountant, I sent it to my tax wizard at BDO Seidman. He found a few small tweaks, but said that there was not much that could be done from an accounting standpoint for this owner. When I reported this back to the seller I could feel his disappointment and frustration.

Source: capital financial

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The residual effects of the Enron (ENE) debacle are slowly, but surely, beginning to PERMEATE the investment landscape. In many instances it is hard to know whether the secondary problems are critically severe, or just a case of paranoid investors overreacting to ghosts. In 1997, ENE was a rather ordinary gas distribution company trading at $20/share. In the 1998-2000 period, the stock rocketed ...AVG. EQUAL WTD. % CHANGE/POSITION IN 2000................................................………………..+21.4%
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