Tax Assumptions and Structures for Searchers?

searcher profile

September 20, 2025

by a searcher from Harvard University - Harvard Business School in New York, NY, USA

In modeling returns, what assumptions do you use for taxes upon sale of the business, assuming you are actively involved? Cap.Gains treatment and are structures that rhyme with QSBS that allow gains to escape untaxed?
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Reply by an intermediary
from The University of Chicago in Chicago, IL, USA
Expected returns are pre-tax. Think of the components of CAPM. If you assume QSBS, then you should gross up the Net sale proceeds to pre-tax if comparing with other options. Even in an S Corp., retained earnings at sale should be grossed up to pre-tax for fair comparison.
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Reply by a searcher
from New York University in New York, NY, USA
Hi Raj, I would just look at return before and after tax. If you have different tax assumptions then I you would have after tax investment returns under scenarios A,B,C.
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