taxes when selling

[Jimmy Buffett]

I have searched this and read everything that I could find but some of those posts were dated so I thought I'd bring it up again.
I priced my wash yesterday and put a price on it that I think will be irresistable. It's a very nice wash and does very well. New responsibilities with my regular job require me to sell or hire a manager to run it. I'm not crazy about having someone else counting my cash. Anyway now my goal is to keep barrack hussein obama from taking the money from the business that I have spent the past 10 years building. We have 2 llc's: one owns the building and land the other the equip and business. I guess long term cap gains are the best I can hope for ratewise. Is "goodwill" a ltcg? Can the new owner depreciate goodwill? How much leeway do I have as to breaking down the total sale price into land, equip, goodwill etc.? I'd love some suggestions.
Also I know that a 1031 exchange is an option. I would consider this if I could find something that doesn't require my presence. Rental property is about all I have come up with. What else is worth consideration?
The buyer and I both have the same accountant, that's actually how we came together. The folks on this board are pretty savvy and I value your advice equally to his.
Any suggestions?
Thanks!

 

[soapy]

I sold one of my businesses a few years ago and found out that goodwill could not be written off. You can assign a value to equipment etc. that would encompass the goodwill. Then it can be written off. Your CPA would give you the best breakdown of your situation.

 

[madscientist]

The buyer and I both have the same accountant, that's actually how we came together.

This puts you, the buyer and your accountant in a bad spot. Reducing your tax liability from the sale will increase the buyer's tax liability (going forward), and vice versa.

The same accountant can't serve you both.

 

[Jimmy Buffett]

Yeah I'm afraid of that. That's why I was hoping that I could get cap gains on goodwill and he could depreciate it. Guess the irs thought of that...

although I just read that if structured as an "asset purchase" godwill can be depreciated over 15 years. If structured as a "stock" sale it is not. Whatever that means...

 

[Jimmy Buffett]

I sold one of my businesses a few years ago and found out that goodwill could not be written off. You can assign a value to equipment etc. that would encompass the goodwill. Then it can be written off. Your CPA would give you the best breakdown of your situation.

Soapy
Did you by chance open that business before 1993? Looks like goodwill was not deductible on businesses open before 1993.

 

[Earl Weiss]

You have a complex situation since whatever value is placed on equipment above the depreciated basis up to the acquisition cost is "Recapture of the Depreciation" and taxed at ordinary income rates.

As stated above you would put a max value on Goodwill to avoid this but the Buyer can't depreciate goodwill so he would want a max value on depreciable assets.

I believe the IRS even has a form for both entities to sign detailing the cost breakdown.

You have 2 LLCs so they need to be looked at seperately wen considering the above. Why you have an LLC for the Business is an interesting question. Laws vary by state but Corps are typcaly cheaper and there is no tax benefit to having the LLC own te business that I know of. I have asked at least a dozen accountants why they reccomend an LLC to own the business and each time after asking a few more questions their rationale did not hold up except for perhaps some accounting cost savings.

 

[Jimmy Buffett]

It was a legal liability issue not an accounting issue.

 

[Ghetto Wash]

I've been depreciating good will from a wash that I purchased in 2000. 15 year straight line.

 

[Earl Weiss]

It was a legal liability issue not an accounting issue.

All the more reason why a corp iz typicaly the vehicle of choice. Liabiulity protection just like the LLC but typicaly cheaper annual fees to the state.

 

[Earl Weiss]

I've been depreciating good will from a wash that I purchased in 2000. 15 year straight line.

Unlike a physical asset one would think that goodwill would not depreciate from a real and accounting standpoint.

I need to check on this.

 

[Reds]

You should discuss the idea of "personal goodwill" with a good cpa or tax attorney. If I recall correctly the use of personal goodwill is dependent on how your biz is organized (Ccorp, Scorp, LLC, etc.) I used it in 2007 when I was selling 5 Burger Kings, some in a Ccorp and some in an Scorp. In certain situations it can save you a big lump of tax money. I used an attorney who was also a CPA

 

[soapy]

The business I was referring to was sold in 1993 so things might have changed since then. Another way of covering goodwill would be a contract for consulting fees over a period of time. This would not let you use capital gains however.

 

[Ghetto Wash]

Unlike a physical asset one would think that goodwill would not depreciate from a real and accounting standpoint.

I need to check on this.

I mis-stated.

I don't depreciate the goodwill. I deduct an ammortized portion of it every year. 15 year straight line. It is labeled ammortization on my taxes, not depreciation. I don't know what the difference between the two is.

 

[Turbo]

I THINK goodwill is amortizable (similar to depreciation )

http://www.irs.gov/publications/p535/ch08.html

Consider buying farmland. It seems fairly low maintenance

 

[Jimmy Buffett]

I have plenty of frIggin farmland thank you very much!!!!!!!
I'm leaning towards sticking to what I know and settling for 10-12%\year.