It’s time to sell your business. Whether you’ve ready to reap the rewards of a successful startup venture, or you’re positioning for an even more lucrative venture, you’re ready to collect on what you’ve built up so far. But no matter what reasons you have to sell your business, there is one major factor to consider: the tax on the sale of your business. Considering that sheer size of pretty much any business sale, you can rest assured that the IRS won’t overlook this one. So if you want to come in safe, you’ll need to cover all the bases.
As with most tax matters, the key to making a legitimate business sale is documentation. If you’re planning on claiming the company yacht as a deductible expense, you need to show that that yacht really was utilized for business affairs. In the eyes of the IRS, only the portion of the yacht where you wined and dined clients or stored important files is eligible for the tax breaks given to businesses. Fortunately, these tax breaks are many, and while they often carry nice financial incentives for those eligible to claim them, you need impeccable documentation to get the benefit.
Tax breaks that apply to business property are, in other words, strictly applicable to the portion of the property used for business. If you used the yacht for both business and pleasure for example, then any depreciation to the below decks would not be countable as a loss to your basis when it comes time to sell your business. You would, however, be able to count any top-side dining room depreciation as a loss at sale time, reducing your tax liability—provided, of course, that the dining room was where you sealed the deal.
Remember that your basis is typically the amount you paid for the property. Your basis is subtracted from the actual sale price of the property, and the resulting sum becomes a gain or loss depending on whether or not you made money. The figure for your basis is larger if the property has suffered depreciation or if you’ve made improvements. Therefore, saving receipts for any work done to that yacht could really save you some money down the road when it’s time to give the devil his due.
Consider bargain and charity sales as another means to reduce your tax liability. However, when it comes time to figure out the best strategy for minimizing the tax on the sale of your business, consult a certified tax professional. |
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