Sale of Company – C-Corp
Hypothetical Example
Tax Implications
| Sale of Assets C-Corp |
Sale of Shares | Sale of Shares with planning |
|||
| A. Sale of assets within Company | |||||
| Proceeds on sale of assets within company | A | 40,000,000 | |||
| Less tax basis of assets within company | (2,000,000) | ||||
| Gain on sale of assets within company | 38,000,000 | ||||
| Total corporate tax on gain on sale of assets within company (28.0% Federal plus 4.9% State tax) |
B | (12,502,000) | |||
| Net cash to be paid as dividend to shareholder | A-B | 27,498,000 | |||
| B. Tax on dividend paid out of Company to US shareholder | |||||
| Taxable dividend to US shareholder | C | 27,498,000 | |||
| Federal tax – personal tax (39.6% plus 3.8%) | (11,934,000) | ||||
| State tax (4.5% assumed) | (1,237,000) | ||||
| Total US Tax | D | (13,171,000) | |||
| C. Total Proceeds from sale of shares* | C | 27,498,000 | 27,498,000 | ||
| Cost basis of shares – nominal | – | – | |||
| Taxable Gain | 27,498,000 | 0 | |||
| D. US tax – Individual tax on sale of shares | |||||
| Federal tax – personal tax (39.6% plus 3.8%) | (11,934,000) | 0 | |||
| State tax (4.5% assumed) | C-D | (1,237,000) | Possible | ||
| Total US Tax | D | (13,171,000) | LOW – if any | ||
| Effective Tax Rate | 48% | ||||
| After tax proceeds to shareholders / owner | C-D | 14,327,000 | 14,327,000 | 27,498,000 |
* Proceeds needed in a taxable sale of shares to equal the after-tax cash on the sale of assets
All calculations are based on Biden Administration tax proposals
LOW TAX or FULLY TAX-FREE solutions to selling US businesses