Innovative Tax Strategies for the $7 Million Sale of a Family-Owned S Corporation

By, John M. Goralka
Sacramento, CA

Family technology/service business operated as an S Corporation to be sold for $7 million. Two (2) specific structures were utilized to minimize tax and build wealth for the Seller and his family (our Clients).

First, $2 million of personal goodwill was established for the Client. This was needed because of the ownership restrictions for S Corporation stock. This personal goodwill was contributed to a Split Interest Charitable Trust (the “Trust”) that provided the following two (2) benefits:

No capital gain on $2 million for the sale of the goodwill contributed to the Trust. Tax savings: $740,000.
Received an Income Tax deduction of $900,000. This provided an additional tax benefit of $272,000. Total tax savings is $1,012,700.

Client and Client’s wife receive income from the Charitable Trust for life providing an ongoing source of retirement income.

Second, Client utilized a Structured Installment Sale for stock with a value of $3 million, which defers tax on the capital gain in the amount of $990,000 for 30 years. This provides an ability to invest more funds for retirement income that would otherwise be used to pay federal and state income taxes in the year of sale.

Sacramento Estate Planning, Tax Planning and Business Attorney.

I’m John Goralka, a Sacramento Estate Planning, Tax Planning and Business Attorney at the Goralka Law Firm, P.C. If you have an estate, tax or business situation needing legal help, contact our team for experienced and friendly advice. You can contact us at 916-440-8036. Alternatively, you can use our convenient online contact form here on our website. We listen, and you can have your questions answered, your case evaluated, and explore your options for getting the legal help you need.

There are almost 200,000 attorneys in the state of California, and fewer than 100 of those attorneys are State Bar Specialists in Estate Planning, Trusts and Probate and State Bar Specialists in Taxation. I am one of the few attorneys with both critical specializations. I passed the California CPA examination and am a former income tax auditor and hearing officer. I am also recognized as a top attorney in the United States by US News and World Reports and by Best Lawyers and hold an AV rating from Martindale which is the premiere rating organization for attorneys. The AV rating is the highest possible rating for legal experience and for legal ethics.

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