Ideas to Reduce Tax Impact to Seller on Asset Deal with C-Corp Target

searcher profile

July 17, 2021

by a searcher from Harvard University in Cambridge, MA, USA

I am proposing an Asset deal
Target is a C-Corp
At a high level, any ideas for structuring alternatives to reduce the tax impact to seller?
Seller does not qualify for Qualified Small Business Stock
Again, looking for high level ideas
Will be consulting with tax folks in due course
Thanks in advance!

0
8
128
Replies
8
commentor profile
Reply by an intermediary
from University of Pennsylvania in Durham, NC, USA
One alternative is to treat part of the purchase price as a payment for personal goodwill. If the existence of personal goodwill is supportable, you can avoid double-taxation on that portion of the purchase price while still allowing the seller to get capital gains treatment. I am not a tax expert so other commenters may be able to provide some insights on feasibility under current tax code, etc. In any case, here is an article that might be helpful: https://www.thetaxadviser.com/issues/2014/may/payne-may2014.html.
commentor profile
Reply by an intermediary
from The University of Chicago in Chicago, IL, USA
Overall hard to do. Very often the delta tax between Asset and Stock is small; Few answers: 1) Personal Goodwill, 2) Consulting contract to the Company for shareholder services. The shareholder starts a defined benefit plan and shelters large portion, 3) same as #2, but directly to shareholder outside the company (helps somewhat), 4) non-compete allocation. Same benefit as #3,
commentor profile
+6 more replies.
Join the discussion