Clinton signs law to help sellers of small businesses
At the last minute, Congress passed and President Clinton signed into law a bill—HR 3594, sponsored by Rep Wally Herger, R-Calif—that will reinstate the installment method of accounting as an option for small-business owners selling their businesses, even if they use accrual accounting in daily operations. This is a repeal of a portion of the Tax Relief Extension Act of 1999, which required users of accrual accounting methods who sold their small businesses to pay taxes on capital gains within one year, even if they did not receive full cash payment for the business during that time. The new law (Public Law 106-573), signed Dec 28, 2000, is retroactive to the enactment of the Tax Relief Extension Act, so the effect is as though the first law had never been passed. This action goes even further than the Internal Revenue Service's issuance of Revenue Procedure 2000-22 on May 15, 2000. That procedure enabled businesses—but only those with less than $1 million in average annual gross receipts over the preceding three years—to use cash accounting and be eligible for the installment method to sell their businesses. Veterinarians who are considering selling, or are in the process of selling, their businesses should talk to their tax adviser about how to take advantage of the installment option. | |