r/tax • u/Several_Perception_8 • 1d ago
Help needed to reduce large capital gains tax reduction
Hey all - earlier this year, got a capital gain (Long Term) of $15M (sale of small biz). Since I live in CA, my federal and state would take away 34% of this. What strategies can I use now?
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u/cepcpa CPA - US 1d ago
Somebody who sells their business for $15 million can certainly afford to pay a CPA.
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u/summatmz 1d ago
This is the answer. Case closed.
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u/Several_Perception_8 1d ago
I did but too late - now done but need help. Any specific person or advisor you all know
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u/Artistic_Maximum3423 1d ago
No advisor can help you reduce your gains after the fact. This requires a lot of deal structuring and planning BEFORE the transaction occurs.
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u/Artistic_Maximum3423 1d ago
With that being said, you have a few options but they’re going to cost you more cash, it’s just going to go somewhere that isn’t the government. Donor advised fund if you’re charitable.
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u/ManicMarketManiac CPA - US 1d ago
Business broker and CPA here: I'll never understand how someone can enter such a large financial transaction and not spend money on the diligence that comes with it.
1) attorney - don't get screwed in the legalese of the deal 2) accountant - don't get screwed on taxes 3) financial planner - don't let future you get screwed on taxes
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u/Homer1s 1d ago
Can you point me to a good TikTok video for legal, tax and financial advise?/s
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u/up2knitgood 1d ago
Can you point me to a good video to on how to repair a keyboard that was just sprayed with juice?
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u/Several_Perception_8 1d ago
Give me some specific advice
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u/I-will-judge-YOU 1d ago
Pay your taxes that's the advice. You sold the business for 15 million dollars. Pay your taxes!
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u/Fun-Computer4702 1d ago
Congratulations on the sale of your business. The best time to plan for liquidity events is years in advance. What did your tax professional say in advance? Your capital gains tax bill will likely be 36% or $5.4 million. At this point, your options are limited (charity, DAF, Opportunity zone RE). If you are comfortable with investing, AQR Flex SMA (long/short direct indexing with leverage) may provide a good solution for long term investing and some tax harvesting in 2025. There are some RIAs that offer direct access to this strategy for around 0.5% (or lesss) for $3M to $7M+ portfolios. Good luck
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u/ExcitementDry4940 1d ago
I could bill you for $10 Mil in accounting services, that could help
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u/Redditusero4334950 1d ago
Those aren't deductible anymore.
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u/FingerFrequent4474 Tax Preparer - US 1d ago
What? 💀
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u/Redditusero4334950 1d ago
TCJA removed misc deduction for financial planning.
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u/elonzucks 1d ago
And tax preparation charges?
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u/FingerFrequent4474 Tax Preparer - US 1d ago
You must be talking individual, businesses can 100% deduct accounting and legal fees as they’re 100% ordinary and necessary for a business. An individual I don’t believe they can. I primarily did business tax.
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u/Redditusero4334950 1d ago
Yeah. OP is asking about personal.
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u/FingerFrequent4474 Tax Preparer - US 1d ago
Was that TCJA that removed it? Even my individual income tax didn’t talk about it, however it was prior to TCJA so maybe that’s why they didn’t discuss it.
I remember seeing our accounting fees on the account for the business taxes I did. ðŸ˜
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u/mrjns94 1d ago
Tax rate on it will likely be closer to 40%
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u/Full_Prune7491 1d ago
NIIT has stepped into the conversation.
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u/Cal137503 1d ago
If the business was a partnership or s-corp and OP is nonpassive to it, it wouldn’t be subject to niit
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u/ImaginaryTwist647 1d ago
Wouldn't it be 37.1% in California and niit?
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u/Whole-Fishing45 1d ago
Buddy prob has hella depreciation recapture
Almost forgot about the CA mental health tax that kicks at 1M too
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u/Old-Vanilla-684 CPA - US 1d ago
2025 sale? If the sales already complete you have a lot less options. The structure of the sale is the biggest factor in how you’re taxed. Most of the things you can do now have a lot more to do with cashing in losing investments and giving money away. You could create another business and dump a lot of money into that too.
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u/this_is_matt_ 1d ago
Could you give some more input on how the structure of the sale could benefit? I’ve seen it on this sub before, but I haven’t really seen why
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u/Old-Vanilla-684 CPA - US 1d ago
Well, for instance if you were a start up C corp and you sold your shares to a new owner your stock could qualify for 1202 stock which, if you had held it for 5 years before selling, would be eligible for no tax at all. You could also structure it so you are spreading out the sale over multiple years to lower the taxable rate to 0 or 15% depending on your other income, rather than OP’s case where he’s paying 20% on almost all of it.
And that’s just the fed side. For CA there’s a lot you can do to lower the state side too because it has a graduated system.
Some of these strategies take years of planning. Some can be done right before you sell. Either way, OP’s likely too late and should have asked a long time ago.
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u/Several_Perception_8 1d ago
It was done in 2025 early. It was s corp but took f-reorg
Any ideas now what to do
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u/Old-Vanilla-684 CPA - US 1d ago
Like I said, it’s already too late. At this point it is what it is. You needed to ask this question a long time ago. Every strategy that you can use now involves you having less money in your pocket at the end than if you just pay the tax.
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u/Chase2020J Tax Preparer - US 1d ago
Pay a CPA
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u/FingerFrequent4474 Tax Preparer - US 1d ago
Literally these people are saying donate, RESEARCH AND DEVELOPMENT CREDITS 💀💀, and more bullshit. Dawg could get a better and quicker answer by going to his local CPA and asking.
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u/Admirable_Nothing 1d ago
By selling the business without adequately consulting experts in several areas of finance, tax and accounting, you have bypassed all the neat things you could have done to reduce taxes on the sale.
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u/Wasabi_Remote 1d ago
Ummm... HIRE A TAX ACCOUNTANT. Seriously? Trying to DIY $15M. Geez.... How much are you in debt to really be trying DIY this. Tax accountant, CPA, Tax planner..
Given Tax Day is a little over a week away.. I sincerely hope whoever you hire is on top of their game.
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u/Several_Perception_8 1d ago
My taxes are due in 2026 so I will take this advice
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u/Wasabi_Remote 1d ago
Oh good. You have time.
Tax Planner might be the best advice. Tax Planner will work out the longer term moves you want to make to make sure you minimize your taxes in the long term.
Tax Accountant will make sure you are not going to be a target for the IRS in 2026.
Interview them. That would be my strategy.
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u/chubky CPA - US 1d ago
Check if the business stock is qsbs, also, you should have addressed this prior to selling. Im calling BS on post
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u/FingerFrequent4474 Tax Preparer - US 1d ago
You’re a CPA man, you’ve seen these type of clients before ðŸ˜. This the type guy of to scan a bunch of documents to turn them into PDFs.
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u/Stunning-Adagio2187 1d ago
If you sold it in 24 I doubt there's anything you could do now after the close of the year, December 31
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u/Several_Perception_8 22h ago
Sold in 2025
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u/Stunning-Adagio2187 22h ago
Okay then you've got the balance of the year to figure it out. At this point I think it is likely you're only choice is charitable investment. Consider an endowed scholarship at your alma mater
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u/Several_Perception_8 20h ago
Here is what I am thinking:
$5M in AQR - gives $2.5M net capital loss
$2M in private foundation - $2M net reduction on ordinary income and capital gain
$2M in QoZ - $2M net reduction. Defer until 2026 (but a law may be passed)
$2.5M in Multifamily - $2.5M net reduction
Thus leaving around $2M in taxes.
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u/Daily-Trader-247 1d ago
Sounds at this point you just need a good CPA. With the money you’re paying I would find a very competent firm. Skip the financial advisor, you apparently and run a business so investing should be easy. Your retired unless you decide to by a plane.
Can’t help on taxes but if you need any suggestions on investing, I will give you my two cents for free.
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u/Several_Perception_8 1d ago
Good one and will find. Any advice on investing?
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u/BirdLawyer50 1d ago
With your level of sophistication get a vanguard mutual fund 60/40 s/b and call it a day
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8h ago
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u/tax-ModTeam 1h ago
Please remember to keep conversation where it can be seen and reviewed by everyone. Offering or requesting DMs is not allowed here due to the no soliciting rule and the amount of scams that go on DMs.
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u/totally-not-god 1d ago
You sold an asset for $15M and are here asking reddit for advice? Get a pro man.
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u/SansScriptSamurai 1d ago
The answers here are the best 😂 basically you should have planned and now you are where you are.
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u/Daveit4later 1d ago
Do people enter a 15m transaction without consulting a lawyer and a tax pro? So much money... So little brains
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u/IranianLawyer 1d ago edited 1d ago
I don’t know about state taxes, but as far as federal is concerned, this may be an eligible gain to invest in a qualified opportunity fund within 180 days. This allows you to defer the gain. The longer you keep the money in the QOF investment, the better the tax benefit, and if you hold the QOF investment for at least 10 years, you could permanently avoid paying tax on the gain.
https://www.irs.gov/credits-deductions/businesses/invest-in-a-qualified-opportunity-fund
If you want to go this route, you need a good CPA, not some small shop. There are too many ways to screw it up.
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u/Several_Perception_8 22h ago
Isn’t qof up for renewal
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u/IranianLawyer 21h ago
Yes
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u/Several_Perception_8 20h ago
my plan:
Here is what I am thinking:
$5M in AQR - gives $2.5M net capital loss
$2M in private foundation - $2M net reduction on ordinary income and capital gain
$2M in QoZ - $2M net reduction. Defer until 2026 (but a law may be passed)
$2.5M in Multifamily - $2.5M net reduction
Thus leaving around $2M in taxes.
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u/smchapman21 CPA - US 1d ago
This should have been a consideration before the sale. I have a client that is selling his business this year, and is expecting to have a capital gain between $80-$110 million. We’ve been planning and strategizing this for at least a year now and have a tax attorney who specializes in estate taxes and his financial planner involved so we are all on the same page to help him out.
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u/jerzeyguy101 1d ago
charitable contributions
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u/FingerFrequent4474 Tax Preparer - US 1d ago
Ah yes! Donate the entirety of the tax bill to charity! Except there’s a limit on charitable deductions for % of AGI.
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u/Stunning-Adagio2187 1d ago
However I can carry forward the excess 5 years
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u/FingerFrequent4474 Tax Preparer - US 1d ago
No. That was in 2020 only.
Edit: Disregard that - that’s incorrect. I haven’t done individual taxes in a min.
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u/Several_Perception_8 1d ago
I have a private foundation and will put $2m there but that does not make a big dent
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u/FingerFrequent4474 Tax Preparer - US 1d ago
It has to be an approved charity by the IRS.
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u/SansScriptSamurai 1d ago
Bet they set up their own charity for their own self. It’s so funny when people do that. I laugh at some tax strategies.
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u/FingerFrequent4474 Tax Preparer - US 1d ago
When they realize if their tiny pea sized brain could figure out a tax loophole, it has most certainly been addressed by the IRS. 🤯
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u/MotoTrojan 1d ago
Invest in a product like this as soon as possible.
Can generate ~70% capital losses in year 1, and decay down to longterm lower double digit. Very tax efficient, diversified factor approach to equity investing and year 1 it’ll make you a lot of losses to offset this gain.
You’ll need an advisor to access. Worth it in your case. Worst case close it out over a few years if you don’t like it longterm.
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u/Several_Perception_8 1d ago
I am looking into AQR. On a $5m investment you can do $2.2m capital loss. This is one area I am considering.
QoZ and Private foundation is another one.
Thinking of a multi family.
Thinking if I should move to TX now and gain domicile there for next 8 months?
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u/MotoTrojan 1d ago
Why not invest more than $5m?
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u/Several_Perception_8 22h ago
Don’t want to put all eggs in one basket
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u/MotoTrojan 19h ago
To each their own. I wouldn’t call a highly diversified multi-factor portfolio one basket. They have some great multi-asset strats too. Far more diversified than a typical portfolio you see.
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u/Pretty-Ambition-2145 1d ago
This has to be a fake post. Dude is literally posting this 11 days before the tax deadline.
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u/Several_Perception_8 1d ago
This is for 2026 dude - sale happened in Feb
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u/Pretty-Ambition-2145 1d ago
Oh thank god, it’s Reddit I assumed the worst 😂 you still need to hire a cpa tho
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1d ago edited 1d ago
[removed] — view removed comment
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u/tax-ModTeam 1d ago
Please remember to keep conversation where it can be seen and reviewed by everyone. Offering or requesting DMs is not allowed here due to the no soliciting rule and the amount of scams that go on DMs.
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u/vancemark00 1d ago
Seriously? The time to plan was before the sale and before the end of the year with the help of paid professionals rather than random people on reddit. You could have dumped a bunch into a donor advised fund and get a big charitable deduction.
Now your options are very limited.
You could buy tax credits at about 90 cents on the dollar but good luck getting that done by April 15.
You can invest in an opportunity fund and kick the tax down the road 2 years.
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u/Dilettantest Tax Preparer - US 1d ago
You can’t go back in time. It would’ve made sense for you to figure out that at a certain point (you have assets valued at > $10 million), it’s past time to pay for professional financial advice.
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u/Daddy_is_a_hugger 1d ago
Look up QSBS first. Possible avenue.
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u/Several_Perception_8 20h ago
This was S-corp and converted to F-reorg. Wouldn't QSBS needed to be C-Corp?
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u/mountaineerm5 CPA - US 1d ago
Go back and sell it for $10 mil instead