Imagine this: You sell your business. The sale produces a $6 million capital gain to you.
Your federal income tax bite on the $6 million of gain is zero. Yes, you are awake. You are reading this correctly. The tax bite is zero.
Internal Revenue Code Section 1202 establishes the rules for the zero tax bite. To get to zero, you need to operate your business as a tax code-defined qualified small business corporation (QSBC).
You may already have a tax code-defined small business corporation, or you may be thinking of starting a new business as a small business corporation. Paying zero taxes on the sale of your business stock is a big incentive.
And then consider that the Tax Cuts and Jobs Act (TCJA) with its new 21 percent corporate tax rate makes the small business corporation even more attractive.
Let’s dive into this and see what’s involved. ... Log in to view full article.