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

Answers:

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.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.