Tax implications for seller's notes and stock sale?

September 18, 2025

by a searcher from University of Pennsylvania - The Wharton School in New York, NY, USA

Hello! I am modeling out a potential stock sale where the seller may hold a seller's note or forgiveable note. The seller is interested in his gains post-taxes. Does anyone have any useful resources for tax implications on stock sales and seller's notes?

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Reply by a searcher
from Georgia Institute of Technology in New Orleans, LA, USA

Hey Luke sorry I don't have any special advice besides a good old fashioned Google or pick your favorite LLM search

Reply by a professional
from Harvard University in Lynbrook, NY 11563, USA

You can find plenty of articles online, but a bit more detail would be helpful so folks can help or direct you. What is the tax status of the company being sold? Is it a C corp, S corp, partnership, single member LLC? Your answer will depend on the answers to this (and likely on what assets the business owns and some other questions). As far as the seller note, generally in a small business sale the seller takes income in respect of the note into account under the installment sale method (google it) over the years in which it is paid. Whether that income is taxed as capital gains or ordinary income depends on the questions I asked before. For the buyer the amount of the note is capitalized into the purchase just like any other purchase money (and then depreciated, assuming it’s treated as an asset purchase for tax purposes). (If you have a forgivable note that is forgiven, that will generally be treated as an adjustment to the purchase price, meaning you’ll have paid less and then presumably have correspondingly less depreciation.) I’m happy to walk you through it high level if you’d like. redacted

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