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Old 02-28-2014, 04:01 AM
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capital gains when selling a business

sorry if i post this in the wrong area, new to here. been reading around the website for awhile now decided to join.

I'm wondering if any of you could help clarify something for me?.
If i buy 50% of a LLC and then later that month i sell the 50% of that same LLC. Since it was held under 1 year it should be taxed at regular income right? I heard somewhere that if the money from the sale is put into an escrow account it wont be taxed til the escrow is empty or "breaks"( basically you don't have to claim it on your taxes til the escrow account breaks). Is this true? So could i see that LLC for 2 billion dollars and take the 2 billion in 2 installments? The first installment would be 1,999,999,999 dollars and the second installment of 1 dollar would set in the escrow account for 370 days. since it was over a year could i get long term capital gains tax rate?



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Old 02-28-2014, 11:06 AM
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Originally Posted by games182 View Post
sorry if i post this in the wrong area, new to here. been reading around the website for awhile now decided to join.

#1;I'm wondering if any of you could help clarify something for me?.
If i buy 50% of a LLC and then later that month i sell the 50% of that same LLC. Since it was held under 1 year it should be taxed at regular income right?


#2;I heard somewhere that if the money from the sale is put into an escrow account it wont be taxed til the escrow is empty or "breaks"( basically you don't have to claim it on your taxes til the escrow account breaks). Is this true?


#3;So could i see that LLC for 2 billion dollars and take the 2 billion in 2 installments? The first installment would be 1,999,999,999 dollars and the second installment of 1 dollar would set in the escrow account for 370 days. since it was over a year could i get long term capital gains tax rate?
#1;right; On a sale of an LLC interest, the selling member will recognize gain or loss based on the difference between the amount realized and the member's tax basis in its interest.aslongas 50% or more of the total interest in the LLC's capital and profits are sold or exchanged, the LLC will be deemed to be terminated for tax purposes only. If the LLC is not terminated, the remaining members are not affected for tax purposes by the sale of an LLC interest.

#2;it depends.I guess you need some taxation related legal help on this; However, a cash basis taxpayer need not actually receive the purchase price for it to be taxable. In fact, the regulations require that a cash basis taxpayer pay tax on income in the year it is actively or constructively received.The concept of constructive receipts becomes tricky when dealing with escrowed amounts. Generally, when cash or property is placed in escrow and the taxpayer receives no right to control the funds, the courts and the irs have held that the amounts are not taxed until the contingency is met and the funds are released. However, if the taxpayer exercises a considerable degree of domination and control over the assets in escrow, the amounts in escrow have generally been treated as having been constructively received by the seller and taxed accordingly

#3;as mentioned above. I do not think so. Too intentional



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