We have an S Corp client who is selling their nursing agency company. It is pretty much a pure service business with a minimal amount of of fixed assets in the company name. I was originally thinking it was going to be an asset sale and 95% of the sales price would be towards goodwill.
But the acquiring company needs it to be a stock sale so all of the licensing, certifications, etc can easily transfer over to the buyer. I told my client it helps a little but we we were looking at all capital gains rates anyway because we would be selling goodwill so do not let them negotiate a lower sales price. My thoughts were the main issue was going to be make sure they knew we were going to use the close the books method for allocating income.
In the due diligence they are mentioning 338(h)(10). This just might be a boilerplate checklist but I wanted to get familiar with this. If the buyer is going to want 338(h)(10) does that mean the existing S Corp will end at the sales date and no closing of the books is needed? I know legally it is a stock sale but the buyer gets to treat it as an asset sale and gets the step up. But does the seller have to treat it as an asset sale as well.