Tax Question For Seller

by an intermediary from University of Florida

4 months ago

If a seller is selling a business for say $10m but has $2m in debt on the balance sheet - can you confirm that the taxable income is $8m and not $10m if the debt is paid at closing?

Thanks

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23 comments

professional from New York University

Depends if the debt is recourse/non-recourse, depends on whether business is a corporate entity (C Corp or S Corp) or a partnership (even if LLC, if it's taxed as a partnership) or disregarded (e.g., most single-owner LLCs). The seller needs to get an advisor. Also, the amount of the debt can absolutely matter, but it depends on the specifics.

4 months ago | like reply | 1 like

searcher from The University of Texas at Austin - Red McCombs School of Business

I agree with all of the above comments. I would only add that the amount of debt on a business does not have any bearing on the tax owed upon the sale of that business

4 months ago | like reply | 0 likes

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