Congress Repealed Bad Tax Law in favor of Small Businesses
Prior to December 17, 1999, a small business owner could sell his or her business on the installment basis and pay the tax as the payments were collected. But in late 1999, Congress passed a tax law that put an end to that favorable tax treatment. If your business used the "accrual method" of accounting (and most do), you were required to pay all tax due in the year of the sale regardless of when you received the cash.
This law was destined to upset and/or cancel many small business sales. In many cases, sellers would have a tax liability in the year of sale that exceeded the down payment they expected to receive from the sale. The seller had to choose between borrowing funds to pay the government or requesting a larger down payment from the buyer. Either choice could cause the sale to fall through.
On December 15, 2000, after a lot of pressure from dozens of small business groups, Congress repealed the bad tax law they had passed only a year earlier. Now thousands of small business will once again be able to sell their business and pay the tax as the cash is collected.
If you would like assistance with your tax and business planning, please contact the CPAS of Kenneth D. Eichner, P.C. We are here to see that you pay no more tax than the law requires. You do not have to be a current client of our firm to contact us. We are a growing firm and appreciate new clients.
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