Selling S-Corp - taxed at ordinary or capital gains
Our business was established as an LLC in 2003. In 2006 we formed and S corp.
We are selling the business and we are currently in escrow and expect to close in January.
We have some questions regarding how to best structure the sale.
If selling today can we allocate a large portion of the purchase price to goodwill and be taxed at the capital gains rate or would it be taxed a the ordinary income rate?
Or would we have to brake up goodwill between business goodwill and personal goodwill in order to get the tax break on the personal goodwill portion?
If we used personal goodwill how would we keep from having an IRS agent 3 years down the road tell us personal goodwill is not in the tax code and we owe more taxes and a 3 year penalty?
The information on the internet and the accountants I've talked to so far all conflict. We need to get this all figured out soon so I'm hoping you can help with some definitive answers and procedures to follow.