Tax Deferred Strategies on Sale of Business
There are many capital gain strategies available today for taxpayers selling a business. These capital gain strategies allow taxpayers to defer, exclude or eliminate the recognition and/or payment of their capital gain taxes from the sale of their business.
1031 Exchange May Not Be Most Suitable Tax Deferred Strategy
1031 Exchanges are only one solution that taxpayers and their advisors may turn to when they wish to defer the payment of their capital gain taxes when selling an investment. While the 1031 Exchange structure is often the best capital gain solution for many taxpayers, it is not always the best capital gain option when selling a business operation because the 1031 Exchange requires the taxpayer to reinvest in like-kind replacement property. Business owners may not wish to reinvest in like-kind replacement property by acquiring another business or assets. This is especially true as the baby boomer generation reaches retirement age and they want to merely cash out.
Seller Financing is Risky
However, they often do not want to get hit with all of the capital gain taxes in one year, either. Business owners can offer to carry back a note (seller carry back financing) so that their capital gain taxes are deferred or stretched out over the term of the seller carry back note. This also means that the buyer remains in the picture and can cause distress by defaulting on the note and/or running the business into the ground.
The Deferred Sales Trust
One relatively new option is the Deferred Sales Trust, which is drafted pursuant to Section 453 of the Internal Revenue Code just like the seller carry back note. However, the buyer is out of the picture so that the risk of buyer default under the terms of the note are eliminated. The taxpayer can choose the term of the seller carry back note in order to determine the length of time they wish to defer or stretch the payment of their capital gain taxes.
Informational Article on the Deferred Sales Trust
Read the article entitled How To Avoid Capital Gains Taxes With a Deferred Sales Trust for a better description of the Deferred Sales Trust, or you can request a Deferred Sales Trust illustration via the Exeter Fiduciary Services, LLC web site.
Contact Information
Exeter Business Valuations
Delbert W. Exeter, CPA, CVA, CFS
Post Office Box 92, Claremont, CA 91711
(909) 982-4417
Email Del Exeter
Delbert W. Exeter, CPA, CVA, CFS
Post Office Box 92, Claremont, CA 91711
(909) 982-4417
Email Del Exeter
Business Valuation Services
Exeter Business Valuations can assist you in valuing your business or assets for any number of reasons, including, but not limited to: sale of your business, buying a business, valuations for an eminent domain settlement or condemnation award, buy/sell agreements, debt or financing transactions, a divorce procedure, a bankruptcy filing, estate or gift taxation, litigation support and insurance claims. Contact Mr. Exeter today to see how he can be of assistance.
What's Your Business Really Worth?
Business owners and executives frequently make best-guess business valuation estimates of their business's or asset's value based on rule of thumb...book value...or an old appraisal report. Relying on these informal outdated measures of business valuation can lead to inaccurate values and costly mistakes. They may over look intangible values and/or discounts.
Whether you are selling or buying a business, planning your estate or settling a contract dispute, involved in a divorce or no court divorce, or eminent domain proceeding, it is critical to have a sound, professional certified business valuations from a firm that will stand behind its conclusions.
Lenders, insurers, the courts, and government agencies are increasingly insisting on expert business valuations to support claims where value is concerned.
I specialize in working with individuals and owner-operated businesses. As a Certified Public Accountant, I understand the unique financial management and tax needs you face. As a business advisor, I offer you a comprehensive scope of services. My professional approach combines tax, financing, business valuation, systems, financial management and accounting and auditing expertise. This approach, combined with dedication to quality, provides an exceptional level of credibility to the valuations.
Whether you are selling or buying a business, planning your estate or settling a contract dispute, involved in a divorce or no court divorce, or eminent domain proceeding, it is critical to have a sound, professional certified business valuations from a firm that will stand behind its conclusions.
Lenders, insurers, the courts, and government agencies are increasingly insisting on expert business valuations to support claims where value is concerned.
I specialize in working with individuals and owner-operated businesses. As a Certified Public Accountant, I understand the unique financial management and tax needs you face. As a business advisor, I offer you a comprehensive scope of services. My professional approach combines tax, financing, business valuation, systems, financial management and accounting and auditing expertise. This approach, combined with dedication to quality, provides an exceptional level of credibility to the valuations.
Integrity
Mr. Exeter does not slant his valuations either way, but is honest and fair in his valuations. He does not use Rules of Thumb methods because the courts and the Internal Revenue Service does not accept those methods. The Internal Revenue Service has never challenged any of his valuation reports. The courts have never rejected any of is reports. He bases his fee on the amount of time to prepare the valuation report and does not have a minimum fee. He can give you a maximum fee.
Independence
Some attorneys try to influence the Valuator to benefit their client. Mr. Exeter does not let them influence him. His opinion is based on the facts of the case and taking into consideration the rules of the business valuation associations, court cases and the rules of the Internal Revenue Service. Mr. Exeter does all the work himself, because it is easier to understand the business or profession. He can understand any risk and what discounts or premiums are appropriate. He does not rely on statistics of other companies that he knows nothing about. The statistics are usually two or three years old. Mr. Exeter prefers to use current information. When there are partial years involved, some valuations software annualizes the year because the software only uses full years. This may not be appropriate with the way the economy is presently. Mr. Exeter understands how the software makes the computations and does the computations manually without annualizing the year.
Knowledgeable
As a CPA and 28 years with the Internal Revenue Service, he understands all types of tax returns and financial statements. He knows if creative accounting has been used in preparing tax returns and financial statements. He keeps current on his education including court case and changes in valuations rules. He wrote the audit program for large case audits used by the Internal Revenue Service. Mr. Exeter has valued several medical practices, estate and gift tax, divorce and buy and sell engagements and understands the problems and court cases involved in these valuations.
Fraud Experience
He has 28 years experience in fraud with the Internal Revenue Service. He worked in organized crime while in the IRS. During his 12 years in his own tax and accounting office and 12 years doing Certified Business Valuations, he has uncovered tax fraud, audit fraud and creative accounting schemes. He has uncovered Ponzi schemes and other criminal acts. It is important to understand fraud schemes because if there is fraud in the tax returns and financial statements, the valuation report may not be valid. He also understands when tax returns and financial statements are not prepared correct, which may affect the net profit and the valuation results.
NACVA Certified
The National Association of Certified Valuation Analysts certifies only Certified Public Accountants who also belong to a State CPA Society or the American Institute of Certified Public Accountants. The member must comply with the educational requirements of those associations as well as those of NACVA. The member must also comply with the standards and rules of those associations as well as the standards and rules of NACVA.
Prior to becoming a Certified Valuation Analyst (CVA) the member must successfully complete a rigorous training and testing process. Accreditation is a statement to the business, professional and legal community that the person has attained a level of knowledge in business valuations considered exemplary and worthy of recognition by this association.
Many consider CVA’s who are also CPA’s to be the most qualified group of consultants to provide independent business and intangible asset valuation services. A background in tax, auditing, accounting, and financial analysis, along with specialized knowledge in business valuations prepares the CPA, CVA to effectively manage the intricate complexities inherent in businessvaluations.
The CVA professional is qualified to provide business valuation services to:
Prior to becoming a Certified Valuation Analyst (CVA) the member must successfully complete a rigorous training and testing process. Accreditation is a statement to the business, professional and legal community that the person has attained a level of knowledge in business valuations considered exemplary and worthy of recognition by this association.
Many consider CVA’s who are also CPA’s to be the most qualified group of consultants to provide independent business and intangible asset valuation services. A background in tax, auditing, accounting, and financial analysis, along with specialized knowledge in business valuations prepares the CPA, CVA to effectively manage the intricate complexities inherent in businessvaluations.
The CVA professional is qualified to provide business valuation services to:
- Attorneys
- Business Brokers
- Business Owners
- Financial Institutions
- Financial Planners
- Insurance Companies
- Investment Bankers
- Judges
- Real Estate Appraisers
- Banks or Trust Companies
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