The Hidden Tax Trap in Every Business Sale

Lucas and Luna unpack a deal-killer that surprises even experienced sellers: IRC Section 197 — the intangible asset amortization rules. Through the real-world case of a Michigan-based industrial packaging company bought in 2022, they show how allocating the purchase price between physical assets, goodwill, and a non-compete agreement can trigger a six-figure tax bill the seller never saw coming. Lucas walks through how a $14 million deal collapsed during due diligence because the seller's accountant allocated 30 percent to non-compete, and the IRS recharacterized it as a covenant not to compete — the buyer had to capitalize it over 15 years, the seller owed ordinary income on the whole amount, and the 2024 IRS audit ended the deal. They also discuss the crucial distinction between asset sales (most common in private deals under $50 million) and stock sales, and why the Tax Cuts and Jobs Act of 2017 still matters for how goodwill is amortized. Listeners learn the one clause every seller should demand: a seller-side allocation protection rider. #Business #FexingoBusiness #BusinessPodcast #BusinessSale #Section197 #IntangibleAssets #TaxTrap #AssetSale #StockSale #Goodwill #NonCompete #IRS #DueDiligence #SellerProtection #TaxCutsAndJobsAct #AllocationRider #PrivateCompanyExit #BuyerSellerPodcast Keep every episode free: buymeacoffee.com/fexingo