#business-exit
Exit strategies and planning for business owners preparing to sell, retire, or transition
Section 1377(a)(2) lets an S corporation split its tax year when a shareholder fully exits, allocating pass-through items to the period each owner actually held stock. This guide covers when the election is available, who must consent, the 1.1368-1(g) alternative, and the bookkeeping it demands.
A practical guide to the federal tax election that lets buyers and sellers of S corporations and consolidated-group subsidiaries treat a stock purchase as an asset purchase for tax purposes — covering Form 8023, the seller gross-up, purchase price allocation under Section 1060, and the mistakes that commonly kill the election.
Section 1248 recharacterizes part of a U.S. shareholder's gain on the sale of CFC stock as a dividend, capped by the corporation's earnings and profits and reduced by PTEP from GILTI and Subpart F inclusions. This guide explains who is affected, how the lookback works, why corporate sellers can prefer the recharacterization for Section 245A, and how to build a defensible work paper.
A practical guide to Section 302 stock redemptions in closely-held C corporations — when a buyback gets capital gain treatment versus dividend treatment, how Section 318 family attribution disqualifies most family redemptions, and how the four 302(b) tests plus the 302(c)(2) waiver preserve sale treatment.
Section 302 of the Internal Revenue Code decides whether a closely-held C corporation's stock redemption is taxed as a capital sale or a full-amount dividend. This guide explains the three Section 302(b) tests, the Section 318 attribution traps that ensnare family-owned companies, the 10-year family-attribution waiver, and the partial-liquidation safe harbor under Section 302(b)(4).
A practical guide to Section 453 installment sales and Form 6252 — how the gross profit ratio defers capital gains across years, when depreciation recapture forces year-one recognition, how the Section 453A interest charge applies above the $5 million threshold, and when electing out beats deferral.
When a partner sells an LLC or partnership interest, Section 751 can recharacterize a large share of the gain as ordinary income taxed up to 37 percent. Form 8308 is the partnership's required disclosure of that hot-asset gain on Form 1065, with a January 31 furnishing leg and a return-due-date filing leg in 2026.
Selling a partnership interest can convert expected capital gain into ordinary income under Section 751, raising the federal tax bill on the recharacterized slice from 23.8 percent to 37 percent. This guide explains Form 8308, hot-asset categories, the January 31 partner statement deadline, and what sellers, buyers, and partnership administrators need to do for 2025 and 2026 transfers.
Personal goodwill carve-outs let C-corporation shareholders pay 23.8% capital gains instead of 40%+ combined tax on a portion of an asset sale. Martin Ice Cream, Norwalk, and Bross Trucking show when the allocation survives; Howard shows when an employment-and-noncompete agreement quietly destroys it.
Personal goodwill, anchored in the Martin Ice Cream and Norwalk Tax Court decisions, lets closely held C corporation owners shift a portion of an asset-sale price out of the corporate tax layer and onto the shareholder as long-term capital gain. This guide explains the doctrine, when it works, the documentation that survives an IRS audit, and the mistakes that have sunk allocations.
Section 280G disallows the corporate deduction and imposes a 20% Section 4999 excise tax once parachute payments to a disqualified individual reach three times the executive's five-year average W-2 compensation, with the penalty applying to everything above 1× the base amount. Private companies can eliminate the consequences entirely through a 75% disinterested shareholder vote paired with conditional waivers signed before closing.
About one third of 2024 private-target M&A deals included an earnout, and median earnout potential rose to roughly 43% of the closing payment. This guide explains contingent purchase price structure, Section 453 installment-sale tax mechanics, the compensation-versus-purchase-price trap, and the recurring drafting mistakes behind six of the last seven major Delaware decisions favoring sellers.
