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Time may be running out for 2012 sales of business to be taxed at current capital gains rates

Oct 30Jeff Matthews

Regardless of your political leanings it seems certain that the tax laws related to capital gains tax rates are going to be in flux.  Some say 2013 will bring taxation on long term capital gains to levels equal to ordinary income tax rates.  At a minimum the fiscal cliff and shifting political situation could well cause an increase in the tax rate on capital gains from the sale of a business.

But when I met recently with a leading M&A attorney, he has not yet seen a rush of deals.  Why?

I can only speculate on what motivates the timing of the sale of businesses.  We know that some sellers would like to sell their businesses but they feel prices are depressed and they are hoping a rising national economy will raise their business’ value.  Others just are not focused on the implications of the proposed tax plans and the impact on their personal wealth.  Still others are confident that calmer heads will prevail in Washington and the changes will not punish success.

Whatever the force that is holding sellers back, time is running out to lock in taxation at current 0 -15% levels.  Don’t think a deal can be put together, financed, negotiated, due diligence conducted and closed by the end of the year without some herculean efforts.  Read that as a crunch of work and a possible financial penalty to the seller.

My counsel is simple.  If you are interested in selling your business and having the gain taxed at the current tax rates, you need to get moving on the deal.  Advisors from B2B CFO can help business owners quarterback the exit process.  Sellers will likely need legal counsel familiar with buy-sell agreements, a business broker or sell side investment banker, tax advisors who understand the rules for taxing transactions, valuation experts to help inventory and price intellectual property, trademarks,  equipment and structures, support to pull together all of the documents that a buyer will want to examine and auditors to provide improved credibility for your financials.  Many of our CFOs know first-hand the exit process and stand ready to assist the business owner.  Visit our website at www.b2bcfo.com for the credentials of our team.

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