How much tax is owed when selling a company?

Question

I searched answers, but nothing seemed like a good answer, so here's my question.
Let's say I start a company. I end up owning 10% of company. It gets sold. My share of the sale is $10 million. I don't have any significant write-offs to make a dent in the $10 million.

Questions:
1. Would it matter if it was paid in stock or cash?
2. Would it matter if my company was an S corp vs a C corp or LLC?
3. How much tax will I owe?
4. If I used that money to purchase a house or investment property (real estate), would I owe less taxes?

Answer 1

1. No
2. No
3. Net proceeds - cost basis = taxable gain. Figure from there. Short term gain -- marginal rate. Long term gain - usually 15%.
4. No

Answer 2

Okay, I am accountant.

There is only one answer to this question. Since, everyone's personal tax situation changes each year, and that in Tax Law there are always many contingencies to your situation. You must go see a CPA.

You will have to bring him/her copies of the last 2-3 years of your Individual tax return. You should ask for tax planning. Some accountant, are very good at this, some Not. If you need a recommendation for a good one, e-mail me.

I could go on for a very long time, asking you specific questions that I feel are relevant in getting to the bottom of this, but if will not be helpful at all unless, I had actual paperwork facts, in front of me.

Good Luck. You Must see a certified public accountant, and ask for tax planning, it will cost your for thier time, but it MAY, save you lots of money in the long run. I think it will. Do not be afraid if they ask you for an up front retainer to do the work. This is normal procedure, when there is a lot of work involved, please do not think your case is an easy one,to tackle.

PS. Do your homework before hiring a CPA, most will give you a free interview. Find out if they usually do this type of work, if not move, on also, try to find a firm with about at least 4 people in the office that do tax work, you will get the benefit of 4 people who can bump their heads together to come up with your proper assessment.

Answer 3

I agree with the previous answer. Only have one additional comment to make: You can use the proceed to purchase invest or purchase another company and avoid paying taxes for now (called a like-kind exchange).

www.irs.gov

Best wishes.