I've got bad news for you: that tax program expired in January. It was only a temporary extension to a small business incentive program that ran from 2009-2010. The law still exists, but the tax benefits are significantly reduced, and it only applies to C Corporations. (http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_0...)
Here are some thoughts (for free, so not in enough detail to act upon without further legal advice):
- Hire a tax lawyer. The amount you save in taxes will pay for itself.
- If feasible, delay the execution of the sale until you have held your company for more than 1 year.
- Consider selling your company for stock of the acquiring company instead of for cash. The transaction would be fully tax free if solely for stock, and taxable only to the extent of cash/non-stock received. (See IRC 368, and related sections.)
- If you made the S election, you must unelect for Small Business Sale Exclusion to apply. This has fun tax consequences.
And finally,
DO NOT HIRE A CPA to do this for you. CPAs know how to add things up, but they frequently get the law wrong. Tax lawyers exist largely to clean up the mess created by CPAs.
To quickly run through these in order:
1) The program was extended. And regardless, the original company investment was made during the holiday, so as long as I roll over within 60 days, I'm OK.
2) I did hire a tax lawyer, which is why I understand the circumstances pretty thoroughly. What they weren't able to do was recommend a specific course of action based upon firsthand experience, which is why I'm asking here - either for someone who has that experience, or a pointer to a lawyer who's specifically experienced with this particular cranny of law
- It's not feasible to delay without wrecking the deal
- A stock transaction is not an option for the acquirer
- We're a C corp
- I asked a CPA as well since what I'm looking for is experiences and strategies. I concur with the gist of this advice and will have a tax attorney look over it if I come up with anything.
Whoops. You're right about the second extension. The law itself (Sec 1202) was not extended, but other code sections that interplay with 1202 extended (and expanded) the scope of 1202.
That's what I get for commenting after midnight...
Here are some thoughts (for free, so not in enough detail to act upon without further legal advice):
- Hire a tax lawyer. The amount you save in taxes will pay for itself.
- If feasible, delay the execution of the sale until you have held your company for more than 1 year.
- Consider selling your company for stock of the acquiring company instead of for cash. The transaction would be fully tax free if solely for stock, and taxable only to the extent of cash/non-stock received. (See IRC 368, and related sections.)
- If you made the S election, you must unelect for Small Business Sale Exclusion to apply. This has fun tax consequences.
And finally, DO NOT HIRE A CPA to do this for you. CPAs know how to add things up, but they frequently get the law wrong. Tax lawyers exist largely to clean up the mess created by CPAs.