Sale of a Small Business

[BluDotLuv]

I am selling my small business and have a few questions:

1. How do I minimize my taxes paid overall?

2. Can I roll the profit into anything else (Selling an LLC) and reduce my tax burden?

3. Are gifts to vendors tax deductible?

4. Can you deduct home office and business expenses for the entire year the business was owned or for the part of the year until it is sold? (For example, can we write off a part of our mortgage for the whole year or only until the date of sale? Or office supplies? Or mileage? etc.)

Thank you!

[ThomasM125]

As far as minimizing taxes are concerned, it may be advantageous to finance the sale of the business over time. That may result in keeping your tax rates lower by avoiding a big spike in taxable income in the year of sale. Also, if you have assets there were depreciated, you may have to recapture that depreciation at higher than capital gain tax rates you will have on non-depreciated assets and goodwill. So, it would be best to assign a lower sales price to assets than to goodwill and non-depreciated assets such as land.

Also, if the stock in your business is qualified small business stock (QSBS), there may be tax advantages upon its sale. You can learn more about that in this TurboTax article. If you qualify, you may be able to reinvest the business sale proceeds in another QSBS company to delay the payment of taxes on the sale. You may also be able to avoid taxes even if you didn't purchase another QSBS company. Otherwise, you cannot delay the tax on sale of the business by re-investing the money in another business.

You can deduct gifts to vendors but not more than $25 per vendor per year.

You can only deduct the home office expenses for the part of the year you were using it for the business.