You are walking down Broadway and a gaggle of people are watching the magic. Everyone knows it’s a con, the mark knows it’s a con; the patter of the dealer is just too enticing. Watching someone get fleeced is like slowing down at an auto accident, you say to the passengers “Oh it’s a wreck, that’s why they are slowing down …I won’t slow down.”
Back in February I wrote a blog about selling your business, consider this a capital gains reminder. I was warning about the Bush tax cuts expiring and the affects it could have on your personal tax situation. It still applies, it is hard to deal with empirical facts. “Let me show you the Queen”.
Probably one of the most important speeches of a presidential candidate is the acceptance speech at a convention. Since this year both candidates had plenty of time to scratch it out, it should be factually correct. In one speech I heard, “I will eliminate capital gains taxes for the small businesses and the start-ups that will create the high-wage, high-tech jobs of tomorrow.” When I heard that line I shook my head, I think its still shaking. Yes I am still shaking my head. This is just too good to be true. “Follow the cards”.
I have looked at thousands of Internet, Telecom and Cable TV company financials statements and cannot remember any that paid capital gain tax. I was at a cocktail party the other night and discussed this with a man who had just retired after 30 years at the IRS, he concurred; he can’t remember seeing it either. It is rare. “See here is the Queen…Follow the cards”.
The IRS man and I agreed that if you go out of business, sell your company for stock, that you personally (not the company) can take long-term capital gains. But that would not apply to the aforementioned speech. After all, that speech talked about expansion not contraction. “See here is the Queen”, everyone knew where the Queen was. The dealer does a few more easy passes.
The Bush tax cuts expire in 2010, around the mid-term elections. So neither party could claim a tax increase when that happens. Government is great, you can raise money without raising rates; you just go back to the old rate. The cards are tossed a few more times. Sort of like the gas pump, those numbers are in there someplace.
Now the cards are dealt face down. So as this is an empirical M&A blog I would urge you to talk to your accountant if you are considering selling in the next two years. Thinking about it, if you are in a current sales process I would urge you to close prior to December 31st. Pick your card carefully. “Where is the Queen?”
All politics are like the Three-Card Monte, the mark never gets his change back.
More about Tom:
