I am seriously interested in following this planning technique. Probably will require several questions to be answered, and I hope others jump in. It almost sounds too good ...
What is the rest of the last sentence in gatortaxguy's post? It starts "If the" and then disappears.
I'll have to re-read OP's posts, but as I recall the whole point of the thread is getting taxpayer (Schedule C, if I recall correctly) to a cash method wherein he can value the notes he receives as payment for his product at their real value, which is way lower than their face value. That way he reports a lower sale price, lower taxable income, and can afford to pay the tax that otherwise is owed on the accrual method. (He'd also avail himself of the favorable treatment of inventory as discussed above).
Going from that to-
Sale of the business;
S corp.;
Valuing the goodwill (is there any?) based on The higher the price, the bigger the tax savings. The terms of the note suggest its face would be significantly greater than its FMV, thereby significantly increasing the tax savings. smacks of inflating beyond reality, at least to me;
Use of tax strategies, such as 338(h)(10) and creating amortizable goodwill, inputting a new owner, going corporate, whatever.
My last point, at least for now. While it does get him to the cash-method goal, it raises some complexities and some risks, which may or may not be worth it. We are not told the taxpayer's age, family situation, financial condition, sophistication, comfort with complexity, comfort with tax risks, willingness to incur initial fees and ongoing compliance costs, etc.
Let's keep the discussion going. The technique suggested has been raised several times, but we should get a better understanding of it, so we can know when and whether to use it.