Capital Gains on Business Sale

Technical topics regarding tax preparation.
#1
MTS  
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My client is in the process of selling their CA business (gain on the sale will exceed $1 million), and on top of the current 23.8% cap gains with NIITs, they are facing a substantial amount of CA state tax as well. Their fear is the potential of the cap gains tax rate bumping up near 40% in 2021, if that's changed under the Biden administration and they don't sell prior to Dec 31 of this year. Lots of unknowns there as who knows when/if tax rates will change in 2021, but other than doing an installment sale are there other strategies to be considered to try lowering the amount of capital gains/state taxes that will have to be incurred on the sale of the business? The seller doesn't want to retain any ties with the business they're selling, and I'm just trying to see if there are other possibilities to consider to avoid some tax on the sale.
 

#2
Nilodop  
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1202??
 

#3
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It's an S Corp, so I believe that's a no.
 

#4
Nilodop  
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I guess I missed that in OP facts....
 

#5
MTS  
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Yes - I should have mentioned that!
 

#6
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Why is the seller getting NIIT on an s-corp sale?

Also, I don't think Biden's proposed rates will go into effect in 2021, IMO.
~Captcook
 

#7
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That's a good point - the client is a non-passive shareholder, so it shouldn't apply.

Regarding Biden's proposed rates, I would agree although that could change depending on these final Senate elections and how the virus is next year. Most likely nothing until 2022.
 


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