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Thursday, November 1, 2012

WSJ: Owners Race to Sell Their Businesses by Year-End to Avoid 67% Capital Gains Tax Increase

Wall Street Journal:  Looming Tax Hike Motivates Owners to Sell, by John D. McKinnon:

A looming increase in the capital-gains tax rate next year is fueling sales of some privately-held businesses.

Many business owners—mostly founders who could gain a lot from a sale—are looking to close deals before next year, when the maximum tax on investment income is scheduled to rise from 15% currently to at least 23.8% on most capital gains, at least for higher-income households. Many sellers intend to convert their equity into retirement funds or just start anew.

"It just made more sense for me to take my chips off the table and go do something else," said Bert Wolf, 60 years old, who has an agreement to sell his compressed-gas business, Acetylene Oxygen Co. of Harlingen, Tex., before year-end. Mr. Wolf added that if he waited until after the tax increase to sell, he would have to expand the business at the current rate "for at least 3 or 4 more years to achieve the same after-tax sales dollar." He is profiting on the sale of his business to Praxair Inc., a public company.  ...

The top tax rate will go up at year-end by at least 3.8 percentage points because of a provision in President Barack Obama's health-care overhaul law. But that will be added onto a top rate that will depend on negotiations between Mr. Obama and Congress after the November election, when they are expected to seek a deal on numerous tax and spending measures.

Mr. Obama and Congress agreed in late 2010 to extend the current 15% capital-gains tax rate through this year. Absent further action, the top capital gains tax rate will rise to 20% on Jan. 1. After adding the extra charge from the health-care law for higher-income households, the maximum tax on investment income would be 23.8%. When combined with the scheduled expiration of some other tax breaks for high earners, the maximum tax on investment income would be as high as 25%.

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Comments

These small businesses will be bought up by larger concerns that will be more susceptible to manipulation by regulation and control measures by the government, and will probably down-size the smaller ventures to achieve savings on the added weight of regulation. This increase in capital gains taxes is a darling tactic of the left, who will then turn around and decry the increased "corporatization" of America, as if they had nothing to do with it.

Posted by: teapartydoc | Nov 2, 2012 9:22:42 AM

A better title for the related story below -- "Hollywood big shot repudiates Obama tax plans, denies government his 'fair share'"

George Lucas’s Jedi estate planning

...experts say, his decision to sell his company to Disney was an estate-planning move worthy of a Jedi Master.

That Lucas struck a deal in 2012 may be no accident, either...take advantage of the lower rate on long-term capital gain while it’s certain.

Posted by: Woody | Nov 2, 2012 9:45:16 AM

Acetylene Oxygen Co. of Harlingen, Tex., before year-end. Mr. Wolf added that if he waited until after the tax increase to sell, he would have to expand the business at the current rate "for at least 3 or 4 more years to achieve the same after-tax sales dollar." He is profiting on the sale of his business to Praxair Inc., a public company.

Posted by: help research paper | Nov 2, 2012 10:26:39 AM

That sucking sound you hear is a lot of money leaving the economy and heading for the Caymens people.Ride the wave,WEEEEEEEEEEE!!!

Posted by: Rich K | Nov 2, 2012 11:05:19 AM