World Class Mergers & Acquisitions  |  For Companies $5 Million to $250 Million in Revenue

Mergers & Acquisition FAQ – September 2010

Q: I am selling property through an installment sale agreement.  Under the terms, the payments will be made well past January 1, 2011 when capital gains rates go up.  Is there anyway I can prevent paying higher capital gains taxes?

A: Yes, although an installment sale carries payments that go well past the end of this year, the taxpayer can elect to recognize the gains in the year of the sale.  Therefore, if you sell your business or property with owner financing, the gains can be taxed at today’s lower rate.

Q: Being that the capital gains and dividend tax rates “sunset” on December 31, 2010, are Congress and the President doing anything to preserve the rates as they are currently in effect?

A: The issue is now being debated between both sides of the political aisles.  While speculation is rampant on whether a law will be passed preserving the rates or not, the best strategy is to assume the tax rates will sunset and make preparations from there.

Q: The estate tax exemption goes from unlimited this year to only $1,000,000 next year.  What should the average business owner do in order to best deal with the estate tax issue?

A: The estate tax exemption will likely be modified to its 2009 level of $3,500,000.  At least that is what the consensus is at this point.  Unfortunately the event that gives rise to the estate tax, death, is inevitable.  There is really no way to plan or prevent the estate tax from being triggered.  It is therefore best to craft your estate plan and/or business sale to heirs to accommodate the situation with the estate tax.

By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors