Ancestors

Toot

Written by MJ on 2024-12-11 at 11:36

Hi cooperators! Is anyone aware of US federal tax code that exempts (or provides a deduction to) a business owner from paying capital gains taxes on the sale of a company to the workers, and in which the transfer of stocks is not involved?

cc: @Matt_Noyes @mattcropp @dajb @ntnsndr @GuerillaOntologist

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Descendants

Written by Josh Davis on 2024-12-11 at 14:52

@jotaemei @Matt_Noyes @mattcropp @dajb @ntnsndr

I haven't heard of such a thing, but IANAL. @beckett would probably be aware if this were the case.

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Written by MJ on 2024-12-12 at 05:16

@GuerillaOntologist Thank you. I talked to a friend later who arranges financing for worker co-ops, and she explained to me something I now feel silly for not understanding. I had been under the impression that there could be small biz (ex., a pizza shop) that simply had no stocks, but she explained to me that all for-profit biz have them, and that the sale of a co. means the sale of its common stock. So all co’s are tax code 1042 eligible 👍 @Matt_Noyes @mattcropp @dajb @ntnsndr @beckett

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Written by Matt Cropp 🌲🌲 on 2024-12-12 at 15:48

@jotaemei @GuerillaOntologist @Matt_Noyes @dajb @ntnsndr @beckett C Corporations are elgible but S corps aren't, though that's going to partially change in 2027. The two ways of selling a business are asset sale and stock sale, and only stock sale qualifies for 1042 rollover.

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Written by MJ on 2024-12-12 at 17:08

@mattcropp The way it was explained to me was that the eligibility would occur if S-corps (and LLCs, I think) comverted into C-corps as part of the process of the sale. What law changes things in 2027? Is it the WORK Act? Have you done asset sales, as parts of a free conversion? I’ll look them up. Thank you. @GuerillaOntologist @Matt_Noyes @dajb @ntnsndr @beckett

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Written by Old Tom on 2024-12-11 at 18:50

@jotaemei @Matt_Noyes @mattcropp @dajb @ntnsndr @GuerillaOntologist

Yes. The IRC § 1042 Rollover. Get a good accountant.

See "Selling Stock to Employees Through a

Qualified Worker-Owned Cooperative

and Sheltering Capital Gain

The IRC § 1042 Rollover"

Eric D. Britton & Mark C. Stewart

https://nobawc.org/wp-content/uploads/2011/11/Selling-to-Your-Employees-through-a-Worker-Cooperative.pdf

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