How is the sale of a business taxed? How is the sale or transfer of my business (stock or partnership interest) taxed? How is the sale of a business asset or group of business assets taxed? These are common questions that a business owner or the holder of a business ownership interest such as stock or a partnership interest may ask. The article below has been drafted to provide general information regarding the above questions or issues and is not specific legal advice for your specific issues and circumstances. If you are considering selling your business or a business interest, you should consult directly with your tax attorney, business attorney and/or your other tax professional and related advisors.
Typically, a business will have many assets and thus the sale of the business is not the sale of only one single asset. Generally, the sale of multiple assets of a business is treated as the sale of each individual asset to determine the gain or loss. Thus when sold, the business assets need to be classified as capital assets, depreciable assets used in business, real property used in the business or inventory or stock in trade that is held so that the items can be sold to customers. Again, the gain or loss on each item is calculated separately. The sale of capital assets will result in capital gain or loss. The sale of depreciable assets may result in ordinary income and the sale of inventory may result in ordinary income as well.
How will my partnership interest be taxed? A partnership interest is a capital interest and will likely be treated as a capital gain or loss, but you recognize ordinary income or loss for inventory and unrealized receivables.
How will my corporate interest or corporate stock sale be taxed? Your corporate interest is measured by your stock certificates or number of corporate shares. Corporate stock is generally considered a capital assets and thus capital gain or loss is typically recognize, but exceptions due apply depending upon the overall circumstances of the shareholder and the corporation.
What is the tax treatment upon the liquidation of my corporation? Corporate liquidations are generally treated as the sale or exchange of property and thus capital. Generally, gain or loss will be recognized by a corporation on the liquidating sale of corporate assets. Furthermore, typically gain or loss will be recognized on the liquidating distribution of corporate assets as if the corporation had sold the asset to the distibutee for fair market value.
If you have questions related to the tax treatment of the sale of your business or business interest, you may speak with a Denver tax attorney or business attorney by contacting The McGuire Law Firm. The McGuire Law Firm provides you with a free consultation to discuss your matters with a tax attorney and business attorney. You can call 720-833-7705 to schedule your consultation.