Yes, the profit from selling your business ownership interest is usually treated as a capital gain, but the path to getting those lower tax rates is full of critical choices and potential traps. The final tax you pay depends almost entirely on your business’s legal structure and the specific way you structure the sale.
The primary conflict is rooted in 26 U.S. Code § 1221, which defines a “capital asset” by listing what it is not. This rule creates a direct clash between you, the seller, who wants to sell a single capital asset (your ownership stock) to get low capital gains tax rates, and the buyer, who wants to buy individual business assets (like equipment and customer lists) that they can depreciate for big tax deductions. The very assets the buyer wants most are often the ones the IRS specifically excludes from capital asset treatment, forcing a portion of your profit to be taxed at much higher ordinary income rates.
This isn’t a small detail; the difference in tax rates is huge. For high-income earners, the top federal long-term capital gains rate is 20%, while the top ordinary income rate is 37%.1 On a $1 million profit, that 17% difference means paying either $200,000 or $370,000 in federal tax—a $170,000 swing that is decided entirely by legal and tax strategy.
Here is what you will learn to navigate this critical financial event:
- 💰 Understand the fundamental difference between capital gains and ordinary income and why it can save you hundreds of thousands of dollars.
- 🏢 Discover how your choice of business entity (LLC, S-Corp, C-Corp) predetermines your tax destiny years before you even think about selling.
- 🤝 Master the high-stakes negotiation between a “Stock Sale” and an “Asset Sale” by understanding exactly what the buyer wants and why.
- ✍️ Learn how to legally allocate the purchase price to different assets to maximize your after-tax cash and avoid common, costly mistakes.
- 🏆 Uncover powerful, expert-level strategies, including the Qualified Small Business Stock (QSBS) exclusion that could let you pay 0% tax on millions in gains.
The Absolute Basics: Why a “Capital Gain” Is the Grand Prize
What Is a Capital Asset, Really?
The IRS gives a simple definition: almost everything you own for personal use or investment is a capital asset.3 This includes your house, your stocks, and your furniture. For a business owner, your ownership interest—like your shares of stock in a corporation or your membership interest in an LLC—is also considered a capital asset.6
However, the tax code gets specific by listing what is not a capital asset. This list is the source of nearly all tax conflict in a business sale. The most important exceptions for you are things used in your business, such as inventory, accounts receivable, and depreciable property like machinery and equipment.4
The Simple Math That Determines Your Profit
Your taxable gain is calculated with a basic formula: the Amount Realized minus your Adjusted Basis.3 Understanding these two terms is the first step to controlling your tax bill.
Amount Realized is everything you get in the sale. It’s not just cash. It includes the fair market value of any property you receive plus any business debts the buyer agrees to take over.9 If a buyer pays you $1 million in cash and also assumes your $500,000 business loan, your Amount Realized is $1.5 million.
Adjusted Basis is your investment in the asset for tax purposes. It starts with your initial cost to acquire or start the business, including purchase fees.10 Over time, your basis increases with additional investments and decreases with things like distributions and depreciation deductions you’ve taken.11 A lower basis means a higher taxable gain when you sell.
The Million-Dollar Calendar: Long-Term vs. Short-Term Gains
The holding period—how long you’ve owned the asset—is the most important factor determining your tax rate. The rule is incredibly simple but has massive financial consequences.
If you hold a capital asset for more than one year, your profit is a long-term capital gain.1 If you hold it for one year or less, it’s a short-term capital gain.3 Short-term gains get no special treatment; they are taxed at the same high rates as your regular salary, which can go up to 37%.1
Long-term gains, however, are taxed at much lower preferential rates: 0%, 15%, or 20%, depending on your total income.1 For most successful business owners, the rate will be 15% or 20%. This tax rate difference is the entire reason strategic tax planning for a sale is so critical.
| Tax Treatment | Holding Period | Federal Tax Rate (for High Earners) |
|—|—|
| Short-Term Capital Gain | One year or less | Taxed as ordinary income (up to 37%) |
| Long-Term Capital Gain | More than one year | Preferential rates (0%, 15%, or 20%) |
Your Business Structure Is Your Tax Destiny
The legal entity you chose when you started your business—often years ago—is the single biggest factor that dictates how your sale will be taxed. Each structure has a completely different set of rules that can either help you or hurt you at the closing table.
The “Pass-Through” World: Sole Proprietorships, Partnerships, and S-Corps
These business types are called “pass-through” entities because they don’t pay tax themselves. Instead, all profits and losses flow through to the owners’ personal tax returns.15 This avoids the “double taxation” of C-Corporations, but it creates unique issues during a sale.
Selling a Sole Proprietorship: A Sale of Many Little Things
When you sell a sole proprietorship, the IRS doesn’t see it as selling one thing (the business). It sees it as you selling every single asset inside the business one by one.17 You and the buyer must assign a value to the equipment, the inventory, the customer list (goodwill), and everything else.
The tax character is determined asset by asset.19 The gain on your inventory is taxed as high-rate ordinary income. The gain on your machinery is subject to “depreciation recapture” (more on that later), also taxed as ordinary income. Only the gain on assets like goodwill qualifies for the lower capital gains rate.
Selling a Partnership or LLC Interest: Beware the “Hot Assets”
Selling your ownership interest in a partnership or a multi-member LLC is generally treated as the sale of a capital asset, which is great news.19 You calculate your gain and, if held for over a year, you pay the lower long-term capital gains tax.
However, there is a huge exception called the “hot assets” rule under Internal Revenue Code § 751. This rule forces you to “look through” the sale of your partnership interest and reclassify part of your profit as ordinary income. Any gain that comes from the business’s “hot assets” is taxed at higher ordinary income rates.9
What are “hot assets”? They are primarily the business’s unrealized receivables and inventory.22 Critically, “unrealized receivables” also includes any depreciation recapture on the partnership’s assets. This rule prevents owners from converting regular business income into tax-favored capital gains.
Selling an S-Corporation: The Seller’s Gold Standard
An S-Corporation blends the liability protection of a corporation with the pass-through tax status of a partnership.15 For a seller, the best way to exit is a stock sale. You sell your shares of stock, which are capital assets, and you recognize a clean capital gain, paying the lower tax rate.7
However, if the buyer insists on an asset sale, the S-Corp sells its individual assets. The character of the gain (ordinary or capital) for each asset flows through to you, the shareholder.7 This means you are directly exposed to ordinary income tax on inventory sales and depreciation recapture, just like in a sole proprietorship sale.
There’s also a dangerous trap called the Built-In Gains (BIG) Tax. If your S-Corp used to be a C-Corp, and you sell an asset within five years of the conversion, the company itself has to pay a corporate-level tax (currently 21%) on any appreciation the asset had at the time of the conversion.7 That gain, minus the tax, then flows through to you and is taxed again on your personal return, creating a painful double tax.26
The C-Corporation Problem: The Specter of Double Taxation
A C-Corporation is a completely separate legal and taxable entity from its owners.15 This separation creates the biggest tax risk of all when selling a business: double taxation.
A stock sale is the only tax-efficient way for an owner to sell a C-Corp. You sell your shares and pay a single layer of capital gains tax.16 It’s clean and simple.
An asset sale, on the other hand, is a tax disaster for the seller. It triggers two unavoidable layers of tax:
- Corporate-Level Tax: The C-Corp sells its assets and pays corporate income tax on the profit.16
- Shareholder-Level Tax: The corporation then distributes the after-tax cash to you, the shareholder. This distribution is taxed again as a dividend on your personal tax return.16
The combined federal and state tax rate on an asset sale of a C-Corp can easily approach or exceed 50% of your profit.16 This makes the choice of sale structure a multi-million dollar decision.
| Entity Type | Best Sale Structure for Seller | Biggest Tax Risk |
|—|—|
| Sole Proprietorship | N/A (Always an asset sale) | Ordinary income tax on inventory and depreciation recapture. |
| Partnership / LLC | Interest Sale | “Hot Assets” rule (IRC § 751) forces ordinary income treatment. |
| S-Corporation | Stock Sale | An asset sale exposes you to ordinary income; BIG Tax if ex-C-Corp. |
| C-Corporation | Stock Sale | An asset sale triggers devastating double taxation. |
The Great M&A Debate: Stock Sale vs. Asset Sale
The negotiation over whether to structure the deal as a stock sale or an asset sale is the central battleground in most M&A transactions. The buyer and seller have perfectly opposite goals, and understanding this conflict is key to winning the negotiation.
Why Sellers Fight for a Stock Sale
Sellers almost always want a stock sale for two simple reasons: tax efficiency and legal simplicity.30
From a tax perspective, you are selling one thing: your stock. Assuming you’ve held it for more than a year, you get a clean, simple long-term capital gain and pay the lowest possible tax rate.30 You completely avoid the nightmare of allocating the price and paying high ordinary income tax on depreciation recapture and inventory.
Legally, a stock sale is cleaner because the buyer takes over the entire company, including all of its liabilities, both known and unknown.32 This allows you to make a cleaner break from the business, transferring historical risks to the new owner.
Why Buyers Demand an Asset Sale
Buyers are just as determined to do an asset sale, driven by a huge tax benefit and a desire to avoid risk.30
The number one reason is getting a “step-up in basis.” In an asset sale, the buyer gets to record the assets on their books at the current fair market value they paid.32 This new, higher basis allows them to take much larger depreciation and amortization deductions in the future, which shields their income from taxes and increases their return on investment. In a stock sale, the buyer gets no step-up; they inherit your old, low basis in the assets.7
From a legal standpoint, an asset sale allows the buyer to “cherry-pick” the assets they want and leave behind any liabilities they don’t want to assume.30 This protects them from unknown lawsuits, tax problems, or other skeletons in the company’s closet.
| Aspect | Stock Sale | Asset Sale |
|—|—|
| Seller’s Tax | Pro: Simple capital gain on stock. | Con: Complex, with portions taxed at high ordinary income rates. |
| Buyer’s Tax | Con: No “step-up” in asset basis; inherits old, low basis. | Pro: Gets “step-up” in basis, creating large future tax deductions. |
| Liabilities | Pro (Seller): Buyer assumes all liabilities, known and unknown. | Pro (Buyer): Buyer can avoid inheriting unwanted liabilities. |
| Complexity | Pro: Simpler transaction, just transferring stock certificates. | Con: More complex, requires re-titling assets and assigning contracts. |
The Million-Dollar Negotiation: Allocating the Purchase Price
If the deal is structured as an asset sale, you and the buyer must agree on how to allocate the total purchase price among all the assets being sold. This negotiation, known as the Purchase Price Allocation (PPA), is filed with the IRS on Form 8594. It directly determines your tax bill and the buyer’s future tax benefits.19
The Tug-of-War Over Asset Classes
The IRS groups assets into seven classes. Where the money gets allocated determines whether you pay a 20% capital gains tax or a 37% ordinary income tax on that portion of the profit.
- Inventory & Receivables: Any profit allocated here is taxed as ordinary income.19
- Equipment & Machinery (Depreciable Assets): This is a major point of conflict. When you sell equipment for more than its depreciated value, the tax rule of depreciation recapture kicks in. This rule says that any gain up to the amount of depreciation you’ve previously taken is “recaptured” and taxed as ordinary income.7 Only gain above the asset’s original cost gets capital gains treatment.
- Goodwill & Intangibles: This is the seller’s favorite category. It includes the value of your brand, customer relationships, and reputation. Any gain allocated to goodwill is taxed as a capital gain.37
The negotiation is a zero-sum game. You, the seller, want to allocate as much as possible to goodwill to get capital gains rates. The buyer wants to allocate as much as possible to equipment and other assets with short depreciation lives (5-7 years) to accelerate their tax deductions, rather than goodwill, which must be amortized over 15 years.33
Scenario: How Allocation Changes Your Net Cash by $540,000
Imagine you sell your S-Corp’s assets for $5 million. Your basis in the assets is $1 million, so your total gain is $4 million. Your assets consist of fully depreciated equipment and goodwill. You are in the top tax brackets (37% ordinary, 20% capital gains).
| Allocation Scenario | Tax Impact |
| Seller-Friendly PPA: $1M to Equipment, $4M to Goodwill. | Tax on Equipment: $1M gain is all depreciation recapture, taxed at 37% = $370,000. Tax on Goodwill: $3M gain is capital gain, taxed at 20% = $600,000. Total Tax: $970,000. |
| Buyer-Friendly PPA: $3M to Equipment, $2M to Goodwill. | Tax on Equipment: $3M gain is all depreciation recapture, taxed at 37% = $1,110,000. Tax on Goodwill: $1M gain is capital gain, taxed at 20% = $200,000. Total Tax: $1,310,000. |
Note: This simplified table illustrates the principle. The actual gain on goodwill would be the remaining purchase price after allocation to other assets. A more detailed calculation shows that a shift in allocation from a seller-friendly to a buyer-friendly scenario could result in a tax difference of over half a million dollars on the same deal price.
A Deep Dive into IRS Form 8594: The Asset Acquisition Statement
When you complete an asset sale, both you and the buyer must file Form 8594 with the IRS. This form forces you to put your negotiated purchase price allocation in writing. While you aren’t legally required to agree on the numbers, filing different allocations is a massive red flag to the IRS and practically guarantees an audit.33
Breaking Down the Asset Classes (Line by Line)
Form 8594 lists seven asset classes, and you must allocate the purchase price sequentially. You fill up one class to its fair market value before moving to the next.
- Class I: Cash and Bank Deposits. In most deals, the seller keeps the cash, so this is usually zero.
- Class II: Actively Traded Personal Property. This includes things like publicly traded stocks or certificates of deposit. It’s rare in most small business sales.
- Class III: Accounts Receivable. This is the value of what your customers owe you. Gain here is ordinary income.
- Class IV: Inventory. This is property held for sale to customers. Gain on inventory is always ordinary income.34
- Class V: Other Tangible Assets. This is a huge category and a major negotiation point. It includes all furniture, fixtures, equipment, machinery, and vehicles. The buyer wants to allocate a high value here for faster depreciation. For the seller, this is where painful depreciation recapture happens, turning your profit into ordinary income.7
- Class VI: Section 197 Intangibles, EXCEPT Goodwill. This class includes valuable intangible assets that are not goodwill, such as customer lists, patents, copyrights, and non-compete agreements. Like goodwill, these must be amortized by the buyer over 15 years.39
- Class VII: Goodwill and Going Concern Value. This is the final “plug” category. Whatever is left of the purchase price after allocating to the first six classes is automatically assigned to goodwill.37 For the seller, every dollar that lands here is a dollar taxed at the lower capital gains rate.
The negotiation over Form 8594 is really a fight over the fair market value of Class V assets. The higher the value assigned to equipment, the less money is left to fall into Class VII as tax-favored goodwill.
Advanced Strategies and Special Tax Rules
Beyond the basic structure, several powerful strategies and specific IRS rules can dramatically change your financial outcome. Knowing these can help you structure a more intelligent and tax-efficient deal.
Deferring Your Tax Bill with an Installment Sale
An installment sale is any sale where you receive at least one payment after the tax year of the sale.41 Instead of paying tax on the entire gain upfront, this method allows you to recognize the gain and pay the tax as you receive the payments over several years.34 This can be a great way to spread out your tax liability and potentially stay in lower brackets.
You must file Form 6252, Installment Sale Income, each year you receive a payment. Each payment you receive is split into three parts: a tax-free return of your basis, your taxable capital gain, and interest (which is always taxed as ordinary income).42
There’s a major catch: the installment method does not apply to depreciation recapture. Any gain from depreciation recapture must be reported and taxed as ordinary income in the year of the sale, even if you haven’t received enough cash to pay the tax.34
The Tax Treatment of Earnouts and Non-Compete Agreements
Deals often include payments that depend on the future or are for specific promises. Their tax treatment is a critical point of negotiation.
An earnout is a payment you receive in the future if the business hits certain performance targets.44 The key question is whether this payment is part of the purchase price (capital gain) or compensation for your ongoing services (ordinary income). The IRS looks at the “facts and circumstances,” but if the payment is tied to your continued employment, it’s likely to be treated as compensation.44
A Covenant Not to Compete is a promise that you won’t compete with the buyer for a certain time in a specific area.45 Payments you receive that are specifically allocated to a non-compete agreement are always taxed as ordinary income.46 This is because you are being paid for a service (the promise not to compete), not selling an asset.45
The Ultimate Tax Break: Qualified Small Business Stock (QSBS)
Perhaps the most powerful tax break in the entire code for entrepreneurs is the QSBS exclusion under IRC § 1202. If you meet all the strict requirements, you can potentially exclude 100% of your capital gain from the sale of your stock, up to a limit of the greater of $10 million or 10 times your basis in the stock.49
To qualify for this incredible benefit, you must meet several key tests:
- C-Corporation Only: The stock must be from a domestic C-Corporation. S-Corp and LLC interests are not eligible.49
- Original Issuance: You must have acquired the stock directly from the company at its original issuance.50
- $50 Million Asset Test: The company’s gross assets must have been $50 million or less at all times before and immediately after the stock was issued.49
- Active Business: The company must be in a “qualified trade or business.” Many service businesses like health, law, and consulting are excluded.50
- Five-Year Holding Period: You must have held the stock for more than five years to get the 100% exclusion.49
This rule requires planning from day one. Many founders who chose an LLC or S-Corp for pass-through benefits later regret missing out on millions in tax-free gains by not qualifying for QSBS.52
The Human Side of the Sale: Beyond the Numbers
Selling a business is not just a financial transaction; it is one of the most significant emotional and psychological events in an entrepreneur’s life. Understanding the human element is just as important as understanding the tax code.
The Seller’s Emotional Rollercoaster
For most founders, their identity is completely intertwined with the business they built.53 The sale process forces them to confront difficult questions and fears.
- Loss of Identity: The question, “Who am I without my company?” is a major source of anxiety and can lead to a post-sale void or depression.55
- Fear of Making a Mistake: The complexity of the deal creates a deep-seated fear of leaving money on the table or making a catastrophic error.55
- Concern for Legacy and Employees: Many sellers feel a profound responsibility to their team and worry that a new owner won’t protect the company’s culture or its people.58
This emotional attachment can directly impact negotiations. Some sellers prioritize finding a “caretaker” buyer who they trust to continue their legacy, even if that buyer doesn’t offer the highest price.60
Do’s and Don’ts for Managing the Emotional Journey
| Do’s | Don’ts |
| Do Plan for “What’s Next”: Have a clear vision for your post-sale life to avoid feeling lost. This could be a new venture, travel, or philanthropy.52 | Don’t Let Emotions Cloud Judgment: Acknowledge your attachment but rely on your advisors to maintain objectivity during negotiations.53 |
| Do Build a Support System: Lean on family, mentors, and other entrepreneurs who have been through the process. You need people who “get it”. | Don’t Go It Alone: Trying to navigate the legal, financial, and emotional complexities without an experienced team is a recipe for disaster. |
| Do Celebrate the Accomplishment: Selling your business is a massive achievement. Take time to acknowledge and celebrate your hard work.64 | Don’t Treat the PPA as an Afterthought: Negotiate the purchase price allocation early, ideally in the Letter of Intent, when you still have leverage.33 |
| Do Prepare for Due Diligence: Have your financial, legal, and operational documents organized and ready. Clean records build buyer confidence.65 | Don’t Hide Known Problems: Address any issues before the sale process begins. If a buyer discovers a problem during due diligence, it will become a major negotiating point against you.65 |
| Do Trust Your Professional Team: Rely on your CPA and M&A attorney. Their job is to protect your financial and legal interests with objectivity.66 | Don’t Ignore State Taxes: State capital gains and estate taxes can take a huge bite out of your proceeds. Plan accordingly, especially if you live in a high-tax state.16 |
Assembling Your “A-Team”: Your CPA and Attorney
No owner should ever attempt to sell their business without a team of experienced M&A advisors. Your two most important players are your CPA and your attorney.
The CPA is your financial and tax quarterback. They will clean up your financial statements, help with valuation, model the tax implications of different deal structures, and negotiate the critical purchase price allocation to maximize your after-tax proceeds.66
The M&A Attorney is your legal shield. They will structure the transaction, draft and negotiate the purchase agreement, manage legal due diligence, and, most importantly, negotiate the representations, warranties, and indemnification clauses that protect you from liability after the sale is complete.67
Three Real-World Scenarios
Scenario 1: The Tech Startup Sale (C-Corp)
- The Business: Sarah founded a software company 6 years ago as a C-Corporation, hoping for venture capital funding. She meets all the QSBS requirements.
- The Deal: A strategic buyer acquires her company for $12 million in a stock sale. Her basis in the stock is $50,000.
- The Outcome: Because she held the stock for more than five years and meets all other criteria, Sarah can use the QSBS exclusion. She excludes the first $10 million of her gain from federal tax entirely. She only pays capital gains tax on the remaining ~$2 million gain.
| Action | Consequence |
| Formed as a C-Corp and held stock for >5 years. | Qualified for the IRC § 1202 (QSBS) exclusion. |
| Structured the deal as a stock sale. | Avoided corporate-level tax and kept the transaction simple. |
| Excluded $10 million of gain from tax. | Saved approximately $2 million in federal capital gains tax. |
Scenario 2: The Family Restaurant Sale (S-Corp)
- The Business: The Chen family has run a successful restaurant for 20 years, operating as an S-Corporation. The business owns its building and a lot of kitchen equipment.
- The Deal: A buyer agrees to purchase the business for $2 million in an asset sale. The Chens’ basis in the assets is low due to years of depreciation.
- The Outcome: The purchase price must be allocated. The buyer pushes for a high allocation to the building and equipment to get bigger depreciation deductions. This forces the Chens to recognize a large amount of depreciation recapture, which is taxed as ordinary income, significantly increasing their tax bill compared to a stock sale.
| Action | Consequence |
| Agreed to an asset sale. | Exposed the sellers to different tax rates for different assets. |
| Allocated a high value to depreciated equipment. | Triggered a large amount of depreciation recapture for the sellers. |
| Recognized gain from recapture as ordinary income. | Paid tax at 37% on that portion of the gain, instead of 20%. |
Scenario 3: The Consulting Firm Sale (LLC)
- The Business: Mark and Lisa own a consulting firm structured as a multi-member LLC, taxed as a partnership. The firm has significant accounts receivable and its value is tied to Mark and Lisa’s personal relationships.
- The Deal: They sell their membership interests for $3 million. The firm has $400,000 in accounts receivable (unrealized receivables) on its books.
- The Outcome: The sale of their interests is generally a capital gain. However, under the “hot assets” rule (IRC § 751), the $400,000 of gain attributable to the receivables is recharacterized and taxed as ordinary income. They also negotiate to sell their “personal goodwill” separately from the firm’s assets, allowing that portion of the deal to be a clean capital gain to them personally.72
| Action | Consequence |
| Sold membership interests in an LLC with receivables. | The “hot assets” rule converted $400,000 of their profit to ordinary income. |
| Separately sold their “personal goodwill.” | Avoided having that value trapped in the entity, securing capital gains treatment. |
| Did not qualify for QSBS. | Paid capital gains tax on the entire eligible portion of the sale. |
Frequently Asked Questions (FAQs)
1. What happens if I sell my business at a loss?
Yes, you can deduct the loss. A capital loss from selling your business can offset other capital gains. If losses exceed gains, you can deduct up to $3,000 against ordinary income annually and carry forward the rest.3
2. How do state taxes affect my sale?
Yes, state taxes are a major factor. States like California can add over 13% in tax, while states like Florida or Texas have no income tax. The impact is significant and depends entirely on where you live.16
3. Can I deduct the fees I pay to my lawyer and CPA for the sale?
No, not directly. Transaction costs like legal and accounting fees are not deducted as expenses. Instead, they are added to your basis in the business, which reduces your total taxable gain on the sale.10
4. Is it possible to sell just a part of my business?
Yes. Selling a partial or minority interest is treated much like a full sale. The sale of that portion of your ownership is a capital transaction, subject to the same rules, including “hot asset” provisions for partnerships.24
5. What is a “working capital adjustment”?
Yes, this is common. It’s a price adjustment made at or after closing to ensure the buyer receives the business with a normal and sufficient amount of operating cash to continue running it without interruption.75
6. What is the difference between personal and enterprise goodwill?
Yes, this distinction is critical. Enterprise goodwill belongs to the company. Personal goodwill is tied to your individual reputation and relationships. Selling personal goodwill separately can offer significant tax advantages, especially for C-Corporations.76
7. Do I have to pay tax on the full amount in the year of the sale?
No, not always. If you structure the deal as an installment sale where you receive payments over time, you can generally pay tax on the gain as you receive the money, deferring your tax liability.34
8. What is a Section 338(h)(10) election?
Yes, it’s a special tax election. It allows a transaction that is legally a stock sale to be treated as an asset sale for tax purposes, giving the buyer a basis step-up while offering legal simplicity.7
9. What happens to my employees after the sale?
It depends. In a stock sale, they typically remain employed by the same company under new ownership. In an asset sale, their employment with your company is terminated, and the buyer may or may not rehire them.67
10. Can I use losses from my stock portfolio to offset the gain from my business sale?
Yes. This strategy is called tax-loss harvesting. You can sell other investments at a loss to realize a capital loss, which can then be used to offset the capital gain from your business sale, reducing your total tax.77