Author Topic: S Corp private stock  (Read 118 times)

Larryf32073

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S Corp private stock
« on: October 09, 2017, 02:31:10 PM »
I invested $140k in my brother's private corp about 5 years ago.  I do not materially participate in the business and I am a less than 1% owner. 
He expects to sell biz in about 14 months and I expect about $960k from sale. LT capital gains of ~$820k.  I am getting ready to retire in a few months.
My question..will any advance planning save me any substantial taxes? The rest of my savings are in 401k Roth IRA and regular after tax accounts.

Maccountant

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Re: S Corp private stock
« Reply #1 on: November 15, 2017, 11:31:23 AM »
Is there a possibility to structure a buyout agreement so it's not all taken in one lump sum in one tax year?

It really depends on what the buyer is willing to commit to, and what you feel comfortable with. The nice thing about a lump sum payment is it all shows up at once so you don't have to worry about collecting your payout in future years. The downside is the taxes.

Agreeing to an installment agreement or some other structured buyout would reduce your lump sum payment (thus reducing taxes) but would also create uncertainty about collecting in future years. What if you agreed to a 7 year buyout and in year 3 the new owners run the company into the ground? Then your stuck with worthless shares and embroiled in an endless legal battle trying to recoup money that is not there.

There are potentially options but it depends on what the parties are willing to agree to and your faith and confidence in the future of the company under new management.