Review the sale of both C corps and S corps, including tax planning related to a possible liquidation after the asset sale. Plus, identify tax and non-tax differences between an asset sale and a stock sale. The sale of a corporate business by selling the assets is a situation where effective tax planning can reduce the tax cost to both the buyer and seller. We'll discuss the use of compensation for services, covenants not to compete, personal goodwill and contingent consideration.
Learning Objectives
- Identify tax and non-tax differences between an asset sale and a stock sale.
- Determine possible benefits from using compensation arrangements, covenants not to compete, personal goodwill and contingent consideration.
- Identify the differences between selling the assets of an S Corp compared to a C Corp.
- Recognize the tax significance and relevant legal authority related to the allocation of the purchase price among the assets purchased.
- Recall the law applicable to "purchased intangibles."
- Identify tax considerations related to asset sales after the death of the shareholder.
Major Topics
- Stock sale vs. asset sale: tax and non-tax differences.
- Compensating the selling shareholders for services performed.
- Covenants not to compete.
- Personal goodwill.
- Built-in gain planning for S corporations
- Installment sales.
- Allocation of the purchase price among the assets.
