Law Firm Sale-buy in or stock sale and taxes

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JWB
Posts: 11
Joined: Mon Jul 26, 2021 9:48 pm

Law Firm Sale-buy in or stock sale and taxes

Post by JWB »

Am sure I’ll need to talk to a tax adviser, but am looking for preliminary information if anyone has been in a similar situation.
I am a single member LLC, taxed as a S Corp. Previously, I “bought in” to the firm over the course of 10 years for a total of $440k and my “partner” then retired. He started the practice so didn’t have any prior “purchase”. I now have an associate attorney and she will buy the practice over time. I’m wondering if to the extent the $440k purchase is offset by her payments to me if that amount could be tax free if structured as a stock purchase (no capital gain). Or, if is anyone in this very smart group who works in this type of matter, I’d be a possible client.
bsteiner
Posts: 9208
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Law Firm Sale-buy in or stock sale and taxes

Post by bsteiner »

JWB wrote: Thu Oct 28, 2021 8:11 am Am sure I’ll need to talk to a tax adviser, but am looking for preliminary information if anyone has been in a similar situation.
I am a single member LLC, taxed as a S Corp. Previously, I “bought in” to the firm over the course of 10 years for a total of $440k and my “partner” then retired. He started the practice so didn’t have any prior “purchase”. I now have an associate attorney and she will buy the practice over time. I’m wondering if to the extent the $440k purchase is offset by her payments to me if that amount could be tax free if structured as a stock purchase (no capital gain). Or, if is anyone in this very smart group who works in this type of matter, I’d be a possible client.
Whether you have gain or loss will depend on the sale price.

The interest element (if you sell all of the shares now for payments over time) will be taxable.

If you hadn't elected S status for tax purposes, you would have been able to depreciate or amortize much of the purchase price when you bought it, and she would be able to depreciate or amortize much of the purchase price when she buys it (though the portion of the gain would have been ordinary income).
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