Optimize tax allocation of deal proceeds
How you allocate your exit purchase price across assets directly impacts your tax liability. Allocating proceeds to more favorable asset categories reduces your tax burden and keeps more money post-exit. This calculator helps you model different allocation scenarios and understand the tax consequences before negotiating final purchase agreements.
Buyers propose the initial allocation; you negotiate. Goodwill and intangibles often get favorable long-term capital gains treatment, while equipment and inventory may receive depreciation benefits. Your tax advisor helps optimize the allocation. This tool ensures you understand the trade-offs and can negotiate effectively with buyers on terms that maximize your after-tax proceeds.
Allocate the purchase price across asset categories:
| Asset Category | Allocation | Tax Treatment | Tax Rate | Tax Owed |
|---|
Moving $100,000 from ordinary income (45.3% tax) to capital gains (23.8% tax) would save you approximately $2,150 in taxes.
Tax Planning Note: Work with your tax advisor and CPA to optimize allocation in negotiation with the buyer. Both parties must agree on allocation, and it must be supportable with valuation analysis. A good allocation maximizes your tax efficiency while remaining defensible to the IRS.