Capital Gains??

[DangRabbit]

I'm embarking on a website/business sale. I'm the seller.

I'm trying to figure out how capital gains work. Math and financial stuff isn't my strong suit

I'm in the U.S.

Could someone answer these in very simple terms?

What's the tax liability for capital gains?
What's the best legal way to keep capital gains to a minimum without reinvesting the money in another website/business?
What exactly is "goodwill" in a business sale, and how does it impact capital gain liability?

Any other thoughts you want to share?

Yes, I am talking to various accountants and will try to get a good financial person when all this comes to pass... but I want to educate myself first and know what to expect...

Thanks!

 

[deepstar]

What's the tax liability for capital gains? - 15% plus your state tax
What's the best legal way to keep capital gains to a minimum without reinvesting the money in another website/business? - You don't have to reinvest you just need to own the product or service for longer than 1 year. This is GW's way to have get more entrepreneurs to start businesses.
What exactly is "goodwill" in a business sale, and how does it impact capital gain liability? It's all how it is categorized. Be sure to get a reputable accountant, not one that's going to tell you to incorporate offshore.

 

[Duckinla]

I don't believe that "goodwill" has any relevance to the seller. Goodwill has been explained to me as a way of accounting for the difference between asset value and actual purchase price. A $7 domain purchased for $1,000 might have goodwill of $993 for depreciation purposes.

 

[DangRabbit]

I don't believe that "goodwill" has any relevance to the seller. Goodwill has been explained to me as a way of accounting for the difference between asset value and actual purchase price. A $7 domain purchased for $1,000 might have goodwill of $993 for depreciation purposes.

Interesting... I'll have to find out more about this because the asset value is what you actual pay capital gains on. For example, if the asset value is $100 and you sell for $1000, you would pay capital gains on $900 -- the GAIN -- not the final sale price.

Anyone else care to explain how "goodwill" works in the sale of a website?

Thanks Deepster, for your thoughts.

Anyone else want to chime in on the other questions?

 

[Duckinla]

Here is a link for capital gains;
http://www.bankrate.com/brm/itax/tips/20010305a.asp

It is important to account for all expenses you have put into developing/promoting/selling the asset, as these expenses can lower your capital gains tax basis.

Goodwill will not apply to you as a seller unless you already have it on your books. It is an accounting tool for purchasers.

http://en.wikipedia.org/wiki/Goodwill