Taxation of selling goodwill

The use of Personal Goodwill as a Tax Savings Opportunity in a Transaction  February 5, 2013 – 09:00 am
Personal Goodwill

Let’s look at the benefits associated with allocating value to personal goodwill in an acquisition of a closely held C corporation.  This is a sale transaction involving closely held business.  If personal goodwill is treated as property that can be sold in conjunction with a company’s assets or stock, it can produce a favorable tax result for both the buyer and the seller.

Buyers typically prefer to structure transactions as asset acquisitions because it provides a tax basis step-up. A step-up results in higher tax deductions for tangible and intangible assets, resulting in lower taxes. In addition, buyers prefer asset acquisitions to avoid acquiring any contingent liabilities that may materialize. Sellers, preferring a stock sale, are often forced to structure a transaction as an asset sale, which significantly increases the cost of selling due to the double layer of taxation.

When a business is acquired in a transaction structured as an asset sale for income tax purposes, the buyer and seller are required to allocate the purchase price to the assets acquired or sold. The primary asset categories typically include working capital, fixed assets, and intangible assets, such as customer lists and relationships, supplier relationships, etc.

The value of intangible assets of the business (including goodwill) is related to the market advantage that gives rise to expected earnings in excess of a normal return on the other operating assets of the business. Business goodwill value is evident to the extent that these advantages relate to assets owned by the business (i.e., patents, trademarks, etc.). On the other hand, to the extent that these advantages relate to the seller’s individual name, personal relationships, or personal reputation, then personal goodwill is evident.

Source: Sunbelt Bay Area

McGraw-Hill Real Estate Tax Secrets of the Rich: Big-Time Tax Advantages of Buying, Selling, and Owning Real Estate
Book (McGraw-Hill)

You might also like:

Sell a business Dallas Texas
Sell a business Dallas Texas
See Ann Sell Weekly Vlog #3: Part-Time vs Full-Time, Real Income, Taxes, and Health Insurance!
See Ann Sell Weekly Vlog #3: Part-Time vs Full-Time, Real Income, Taxes, and Health Insurance!
PLUS SIZED THRIFT HAUL- 3 Stores, 10 Items, Less than $20
PLUS SIZED THRIFT HAUL- 3 Stores, 10 Items, Less than $20

Quotations from the Freedom Crowd

'I never intend to adjust myself to the madness of militarism.'
- Martin Luther King Jr.
'However sugarcoated and ambiguous, every form of authoritarianism must start with a belief in some group's greater right to power, whether that right is justified by sex, race, class, religion, or all four. However far it may expand, the progression inevitably rests on unequal power and airtight...iners, the weavers, the chemists, the carvers, the dyers, the designers, the machinists, where were the hands, the people who made? Out of sight, somewhere else. Behind walls. All the people in all the shops were either buyers or sellers. They had no relation to the things but that of possessions. How was he to know what a goods’ production entailed? How could they expect him to decide if he wan

Interview with Chomsky from India

Chomsky In First Person
In this exclusive interview, Noam Chomsky speaks to V.K. Ramachandran about the 'new war against terrorism', imperialism, the media and the role of intellectuals.
November 15, 2001: there is a break in the North East monsoon, and it is a clear, cool day in Thekkady. Noam Chomsky is on the second day of his first holiday in many years, a five-day break from pu...tle illegitimate authority and expand the domains of freedom and justice? The task, then, is not to 'speak truth' to the king, or even to the king's subjects, but to learn from them, to contribute what we can, and to participate with them in common struggle for values we discover and uphold. It seems to me that those are the directions in which responsibilities of intellectuals should be sought.

The Reagan Doctrine: Third World Rollback

The Reagan Doctrine:
Third World Rollback
from the book
ROLLBACK
Right-wing Power in U.S. Foreign Policy
by Thomas Bodenheimer and Robert Gould
South End Press, 1989
Nowhere is rollback more evident than in U.S. policy toward the Third World. Third World rollback has come to be named the Reagan Doctrine. However, it is inaccurate to attribute this Doctr...ts became standardized for the Third World. In the case of nations to be rolled back (e.g., Nicaragua), governments were called terrorist and the insurgents were labeled democratic.
In the case of countries to be supported against 'communist' insurgencies (e.g., El Salvador and the Philippines), the governments were called democratic and the insurgents were labeled terrorists.
*****

The Reagan Regime in all its ugly, damned ugly splendor

The Reagan Doctrine:
Third World Rollback
from the book
ROLLBACK
Right-wing Power in U.S. Foreign Policy
by Thomas Bodenheimer and Robert Gould
South End Press, 1989
Nowhere is rollback more evident than in U.S. policy toward the Third World. Third World rollback has come to be named the Reagan Doctrine.
However, it is inaccurate to attribute thi...interests became standardized for the Third World. In the case of nations to be rolled back (e.g., Nicaragua), governments were called terrorist and the insurgents were labeled democratic. In the case of countries to be supported against 'communist' insurgencies (e.g., El Salvador and the Philippines), the governments were called democratic and the insurgents were labeled terrorists.
*****

Chipworks Brings Patent Licensing Experts to IP Business Congress  — Manufacturing Digital
Chipworks invites delegates to stop by their exhibit booth (#12) at IPBC to discuss ways in which the Company's patent evaluation and infringement analysis services can help strengthen semiconductor, systems, and software patent licensing positions.

Memjet Appoints Chief Patent Counsel  — MarketWatch
"Ben's deep experience in global patent evaluation, filing and maintenance will serve us well as we accelerate our growth and support our OEM customers in the commercialization of Memjet technologies." Memjet assumed control of its intellectual …

Allyear Tax Guides Selling Your Home(S): Tax Guide 404 (Series 400: Owners and Sellers)
Book (Allyear Tax Guides)
Goodwill Haul - Dont Be Afraid of Secondhand - February 4
Goodwill Haul - Dont Be Afraid of Secondhand - February 4
FrugalProTip: Check Craigslist & Thrift Stores Now, $200 Worth of Clothes for $40 (No Sales Tax)
FrugalProTip: Check Craigslist & Thrift Stores Now, $200 Worth of Clothes for $40 (No Sales Tax)
Sell a business with little assets (large amount of goodwill)
Sell a business with little assets (large amount of goodwill)
Wiley Getting Started in Annuities
Book (Wiley)
Selling Your Business: Goodwill & Intangibles Paths to Maximum Gain
Book (Allyear Tax Guides)
Wiley J.K. Lasser's Homeowner's Tax Breaks: Your Complete Guide to Finding Hidden Gold in Your Home
Book (Wiley)
Goodwill & Garage Sale pickups - Tips for eBay reselling
Goodwill & Garage Sale pickups - Tips for eBay reselling
Mass Appeal Help the Goodwill stuff a truck!
Mass Appeal Help the Goodwill stuff a truck!
Self Storage Auctions As A Business? Hell Yeah!!
Self Storage Auctions As A Business? Hell Yeah!!

Related posts:

  1. Selling goodwill
  2. Explanation of goodwill
  3. Evaluation of goodwill
  4. CRA Selling goodwill
  5. Tax treatment of selling goodwill