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  1. #1

    Question Tax Deduction for Selling Business at Loss


    I am planning on selling a small business this year (hopefully sooner than later!). I will be selling the business at a loss, appoximately $16,000 on what I invested.

    Can I write off any part of this loss? I am currently now employed at another business that I do not own.



  2. #2
    Join Date
    Mar 2008

    Default Re: Tax Deduction for Selling Business at Loss

    I sold two businesses at a capital loss through the years.

    The first time it happened, I went back to work, I was told I could either deduct the loss, I recall there was a limit on offsetting captial losses to ordinary income each year, and to do it over a few years. Or I could take some gains on my stock portfolio exceeding the loss, and then offset the entire amount. I decided to sell some stock and did the offset.

    Then two years ago, I sold another business, and orginally it looked like I was going to offset the losses over a few years to active income, but then decided that I should unload sold real estate, then at it's peak, and the entire loss was used up that way.

    Another option I thought of was to cash out some IRA, I was 60 years of ago last year, offset the losses to the taxes due on the cashing out. My CPA was going to look into it, but turned out I didn't have to because I sold the property.

  3. #3

    Default Re: Tax Deduction for Selling Business at Loss

    Thanks for your input. I am definitely going to talk to my accountant, but I always like to go in a bit "heads up" so our meeting can be more meaningful.

    Any other advice is also greatly appreciated.


  4. #4
    Join Date
    Mar 2008

    Default Re: Tax Deduction for Selling Business at Loss

    My other thought is if you could make some of the capital loss, into an operating loss, and operating losses can be deducted against ordinary income immediately, with no annual limitatation.

    I don't know enough about your business to give to particular advice. As an example, I pay an attorney over $3,000 to do the business closing as a buyer, and presumably, your buyer may have to do the same, so if you say cover some of his expenses, and build that into the purchase price, the operating loss for the year would be higher, and the capital loss lower.

    When I sold my business, the landlord as a condition of the sale wanted the buyer to do some renovations, including a new roof, driveway improvements. Now if I cover those items as expenses, increase my operating loss, and build that into the purchase price, the capital loss gets lower, and pushed an operating income into a loss. The buyer has the further benefit of having those items included in a note he gives me.

    Another thing is timing. The business sale was closed in early Feb, with Jan tradtionally being dead, so covering a whole bunch of expenses of a sale makes it into a loss for the year. Presumably, you didn't do much in that business this year that your're selling, so any expense would become an operating loss.

    Of course, double check these ideas with your CPA.

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