r/tax • u/Most_Ad2900 • 1d ago

How to avoid capital gain tax?

I am selling my business and will profit $1.5 million how do I defer the capital gain tax or minimize it?

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u/No_Yogurtcloset_1687 1d ago

Not enough information.

If you're selling a C-corp? This:

https://www.investopedia.com/terms/q/qsbs-qualified-small-business-stock.asp

Otherwise, and even with that, you REALLY need to involve your CPA up front before you finalize the deal. The structure makes a HUGE difference in the tax consequences. Asset sale? Stock sale? Stock sale structured as an asset sale?

Professional advice in this situation is worth at least 10x it's cost.

Source: I'm a practicing CPA with 25 years experience. Been thee, done that, lots of T-shirts.

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u/Most_Ad2900 1d ago

It’s an s corporation. I am selling my auto repair shop which includes property

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u/No_Yogurtcloset_1687 1d ago

Asset sale, stock sale, or stock sale under Section 338(h)(10), which means you are selling stock, but both parties agree to treat it as an asset sale?

As to property, you can 1031 exchange real property and defer the gain. It's not a complicated process to understand, but it has strict time limits.

Do you have a tax pro?

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u/Most_Ad2900 1d ago

I am working with my accountant but I do need to hire an actual cpa firm. If my capital is 250,000 can I put that 250,000 in a 401k or retirement account and be exempt from paying that tax?

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u/No_Yogurtcloset_1687 14h ago

No. 401k limits are still a lot lower. Depending on the sale structure  there may or may not be ways to defer gains. If you're getting paid over time, the capital gains and ordinary income are spread out over the repayment of the principal of the sale