Personal Goodwill: Three Recent Taxpayer Defeats Nevertheless Affirm Existence of a Sometimes Forgotten Asset
Author: Michael F. Lynch, J.D., CPA.; David J. Beausejour, J.D., CPA.; David B. Casten, CPA.
Source: Volume 28, Number 02, Winter 2011 , pp.29-43(15)
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Abstract:
Personal goodwill remains a viable concept that can yield significant tax savings to a shareholder-employee when a closely held C corporation is sold. Taxpayer success in supporting favorable tax treatment, however, requires careful transaction planning, and this strategy will not work in every situation. This article reviews the potential for double taxation when a C corporation is sold, and highlights lessons from the case law that can help a shareholder-employee structure a sale—and help assure the taxpayer’s victory should the IRS challenge his position.Keywords: personal goodwill, covenant not to compete, sale of closely held C corporation
Affiliations:
1: Bryant University; 2: Bryant University; 3: KPMG (ret), Boston University School of Law Graduate Tax Program.