I have a client who purchased 100% of the shares of an existing C Corp roughly 15 years ago and has now been made an offer from an outside party to sell the business, which would result in a significant loss. If it’s structured as a stock sale, I’m thinking the tax impact would be a LTCL on Schedule D for the taxpayer, with a carryforward of excess LTCL.
To put some figures to it, the shareholder purchased the business for roughly $350,000 and will sell it for $200,000, resulting in a LTCL of roughly $150,000. The current year tax impact would be a LTCL of $3,000, with the remaining $147,000 carried forward (unless the taxpayer can use any of the loss to offset capital gains). The corporate earnings and profits are minimal (maybe $10,000), but I assume those just move along to the buyer and wouldn’t have any tax impact to the selling shareholder.
So, a few questions:
• Am I accounting for things correctly here, or am I missing anything/oversimplifying this? With a small amount of existing corporate earnings and profits, would a 100% shareholder typically take a dividend payment for those accumulated earnings and profits prior to selling their shares or is that just factored into the sales price?
• Are there better ways to structure the sale to take advantage of the seller’s loss?