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Need Ideas on purchase agreement

I am looking to buy a business, but have run into a possible tax issue for the seller.
Scenario: Total sales price of $2,500,000, broken out as:
$2,380,000 for all ABC, Inc. assets
$XXX,000 in cash
$X,XXX,000 in a seller financed note at 5.5% interest for 120 months
$120,000 for a consulting agreement ($2,000/mo for 60mo)
The $2,380,000 purchase price would include:
Capital Equipment: $ 50,000
Five Year Non-Compete: $ 500,000
Goodwill: $1,830,000
Total $2,380,000
The Challenge: The seller has already amortized $750,000 in Goodwill when seller purchased the company 20 years ago. Seller is subjected to a 40% recapture of the $750,000, which is $300,000 payable when filing 2014 taxes.
Question: What creative ways can I structure the deal to avoid the seller having to pay the punitive recaptured Goodwill tax rate of 40%?
This impacts the possibility of the sale going throu

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Answers (2)
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Tolland County, CT

Wow. You need a CPA to answer this in writing. Then if they screw up they are liable. Not here.

Apr 15, 2014
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The BAF Group LLC
MD

David, there are simply some things that cannot and should not be answered in a (frequently) anonymous, unqualified and free Internet bulletin board. This is one of those. You really need to speak to your CPA about this.

Apr 13, 2014

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