I'm selling my sole proprietorship. It is a technology company with few / no tangible assets or customer base, mostly just software. This is being done as an "Asset Transfer" to new owners in another state. However, the sale is taking place in my state. As for the tax implications for me, I'm being told different things by the broker handling the deal, my CPA and internet search is of course completely different than either. Here's my question(s):
What are the tax implications of doing a goodwill allocation? It seems like the buyers are pushing for this. And my CPA is saying no way, it will cost me many thousands in taxes and doesn't make any sense. It looks like it converts from capitol gains at 14% to something else at about 35%. But, perhaps the buyers will be saving this way? Is it so they can depreciate their purchase or avoid sales tax or what? Is it something that has to be done?. A quick internet search seems to support it always being done to appease the IRS though my CPA says no. Is there something that is mutually beneficial to both the buyer and seller (me) as far as taxes go?
This will kill the deal for me as I'm not paying another 21% of my revenue in taxes. I could just as well keep the business for one more season and make the same amount then just close it down afterward.