Sale of Closely Held Businesses
Author: Jennifer Kowal
| CPE Credit: |
4 hours for CPAs
4 hours Federal Tax Related for EAs and OTRPs
4 hours Federal Tax Law for CTEC |
Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2025 to receive credits. NOTE: Go to My Professional Profile in your CCH CPELink account settings to ensure your name, and PTIN number; matches your PTIN card
The sale of closely held businesses raises a large number of tax issues. Some sales proceeds are taxed at ordinary income rates rather than capital gain. The structure of the sales transaction affects the buyer's depreciation and amortization going forward. The purchaser may or may not be able to deduct transaction fees related to the acquisition.
This course addresses common tax issues that arise in the sale of non-public companies and other closely held businesses, including the tax treatment of stock sales and asset sales, the election under section 338(h)(10) and the allocation of purchase price, escrow arrangements and earnouts, and the tax treatment of intellectual property and intangible assets all add challenges to planning for and reporting the sale of a closely held business.
Publication Date: December 2022
Designed For
Tax practitioners at all levels who provide advice and return preparation on transactions involving sale of businesses.
Topics Covered
- Tax treatment of stock sale vs. asset sale, from buyer and seller's perspective, and reasons for choosing one over the other
- Consequences of section 338(h)(10) election
- Allocation of purchase price in asset sales
- Tax treatment of intangible assets including intellectual property, covenants not to compete, and goodwill
- Deferred sales proceeds
- Tax consequences of earnouts and escrow accounts
- Sale to family members (related parties)
- Spin-offs of separate lines of business and disposition of unwanted assets prior to acquisition
- Capitalization of transaction costs related to sale of business
Learning Objectives
- Explain the difference in tax treatment between stock sales and asset sales
- Identify when a section 338(h)(10) election should be made and its consequences
- Describe how earnouts and other contingent purchase price transactions are treated under tax rules
- Identify special rules regarding taxation of intangible assets
Level
Intermediate
Instructional Method
Self-Study
NASBA Field of Study
Taxes (4 hours)
Program Prerequisites
Basic familiarity with sale transactions, including how to calculate gain and loss.
Advance Preparation
None
