I'm a bit confused by this as well. Why is your partner concerned about paying capitol gains? She is buying, not selling, so she would have no capitol gains on the purchase. You will have capitol gains on the $1,000,000 less the basis. If you carry a note on the $500k, you would be paying ordinary income tax on the interest and capitol gains on the principle.I am selling a small percentage of my business to my business partner for roughly $1 million. She has asked to give me half now and finance the other half over the course of the next 12 months at 8% interest. My original plan was to lump sum invest the amount of the sale less taxes owed. She has the money to purchase outright but is trying to avoid having to pay capital gains on her end. My fear is that we'll miss out on a market upswing or miss the opportunity to TLH to offset the capital gains we are going to have to pay this year. Our tax situation will be: fed 20%, state 4.5%, and we are subject to 3.8% NIIT. If I accepted what she wants to do we would earn roughly $25,000 in interest over the course of the next 12 months. Thank you in advance for your thoughts/advice.
It seems to me that the only reason to avoid taking an 8% ROI would be if you are trying to avoid generating taxable income with that $500k investment. I just sold my interest in my business to my partner with a 10 year note at 8.25% (a much MUCH smaller business than you have). While I like the 8.25% ROI, I am not going to enjoy paying the income tax on the interest income.
Statistics: Posted by WeakOldGuy — Tue Jun 04, 2024 1:38 am — Replies 3 — Views 294