When business assets are sold in Colorado or any other state, the seller may have to pay capital gains taxes on any profits realized. Capital gains can be categorized as short-term or long-term gains depending on how long an asset was held. Short-term gains are generally taxed at an individual’s ordinary income tax rate while long-term gains were taxed at 17% as of 2018.
There are several different types of capital assets a company could have. Examples include land, buildings or a company car. Inventory that is sold to customers may also be considered a capital asset as well as intellectual property that a business owns. A business may also have stocks, bonds or other investments that gain value over a period of months, years or decades. It is vital to note that capital assets can depreciate in value, and a company may be able to reduce its tax burden when a loss occurs.
If a financial gain or loss is never realized, it will likely be treated as ordinary income as opposed to a capital gain or loss. The IRS requires that capital gains or losses be calculated for each capital asset a company has even if they are sold together as a package. If a partnership is sold, each partner’s stake in the company is considered to be a capital asset.
The sale of a business may trigger a variety of taxable events that buyers and sellers alike should be aware of. It might be in a seller’s best interest to consult with an attorney and other professionals before closing on the sale or transferring company assets. An attorney could able to review a proposed deal to help ensure that it is structured in a favorable manner.