Business sales tax Nebraska
The IRS outlines goodwill as “the worth of a trade or businesses settled upon anticipated preserved client support attributing to its name, fame, or any other element.” IRS Publication 535: Businesses Expenses, Ch. 9, Cat. No.15065Z.
The American community of valuators outlines goodwill as: “that abstract asset coming up as an outcome of name, fame, client commitment, location, products, and standardized elements not severally distinguished.” And as “that abstract asset coming up as an outcome of factors such as name, fame, client dedication, location, products, and associated elements not severally Nebraska distinguished and appraised.”
Goodwill, still, can be carved up into personal and business (endeavor) goodwill. Different from endeavor goodwill, personal goodwill is the actual value of services of a particular and recognizable person to a business.
The difference between personal and endeavor goodwill is crucial to that extent as: (a) saving taxes in the sale of businesses; and (b) carving up assets in a marriage.
For divorces, endeavor goodwill is regarded as marital property and can be carved up, while personal goodwill is the only Business sales tax Nebraska property of the individual. See: May v. May, 589 S.E.2d 536 (W. Va. 2003) and Ledwith v. Ledwith, 2004 Va. App. LEXIS 488 (October 12, 2004).
Once a C Corporation is sold the Business sales tax Nebraska enterprise goodwill is taxed at the corporate rate (which could be as high as 35%), and then again as a dividend (another 5 – 15%) when it is dispersed. Not comprising any state taxes that might be owed, a $3,000,000 attain could lead to just $1,500,000 after-tax dollars to a shareowner.
With some exceptions, sales involving S corporations, partnerships, sole proprietorships or other pass through entities, blue sky gets taxed only once as a capital asset. Note: One can also incur C Corp. tax with an S Corp, if the S Corp. is not at least ten years old and does not have, for example, adequate built in gains. (Visit your Business sales tax Nebraska accountant for the fine details).
In this article we are concerned about car business dealership sales and are to consider assigning a part of the sale proceeds to personal goodwill since, as CPA Carl Woodward notes in the Spring 2006 publication of The AutoCPA Group’s “Headlights”: “For some dealerships, much of the total blue sky value is attributing to this Business sales tax Nebraska personal goodwill.”
The concept of carving up goodwill with personal and endeavor distinctions initially emerged in the 1986 Nebraska case of Taylor v. Taylor 386 N.W.2d 851 and was then conveyed to other states. See: Beasley v. Beasley, 518 A.2d 545 (Pa. Super. Ct. 1986); Hanson v. Hanson, 738 S.W.2d 429, 434 (Mo. 1987); Prahinski v Prahinski, 75 Md App 113, 540 A2d 833 (1988); In Re Marriage of Talty 166 Ill 2d 232, 652 NE2d 330 (1995) and Martin Ice Cream Co v. Commissioner (110 T.C. 189 1998).
In 1998, Norwalk v. Commissioner TC memo 1998-279 set personal goodwill bases from an abstract asset that is the property of the individual, not the corporation, and that personal goodwill could be paid to proprietors since the business employment agreements of the Business sales tax Nebraska individuals was terminated once the corporation was sold.
