How to I structure a sales agreement so as to pay the least amount in taxes?

I have an agreement with another business to buy half of my existing business.
The agreed upon price is 400,000, 130,000 is in equipment purchases and leases.
How do I structure the written agreement so I get taxed at the highest federal
and state rates?

Asked on May 10, 2016 under Business Law, South Carolina


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

This is really a question for an accountant, not an attorney, but as general matter, the ways to reduce taxes are:
1) To change the timing of payments, so that payments are either accelerated into a year in which you have a lot of tax deductions, so that you can take full use of those deductions; or by spreading payments out over several years, so that in now one year, is your income pushed into higher brackets.
2) By characterizing as much of the sale as possible as being "capital gains"--profit from the sale of certain assets, like machinery or intellectual property--which is taxed at a lower rate.
3) By making maximum use of depreciation and write-offs of any losses or bad debts.
You should sit down with an accountant--not just an income tax preparer, but any actual accountant--to strategize how to structure things for maximum tax benefit.

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