Sell Your Business. “Sail” Your Personal Goodwill Through The Pooled Income Fund.

When you are planning to sell your business, stop and ask yourself, “Do I personally own valuable personal goodwill?”

There is a notable difference between Personal Goodwill and Corporate Goodwill. Personal goodwill is attached to you — your reputation, your relationships, your skills. If you are selling your business, your personal goodwill can be sold by you separately, and this potentially allows you to experience a significantly more tax-efficient deal structure — that is not disadvantageous for the buyer either.

In a nutshell, for the seller the capital gain from the sale of personal goodwill is taxed as a favorable long-term capital gain (if held more than one year).

For the buyer, the purchase price allocated to personal goodwill is amortized straight-line over 15 years under IRC §197, regardless of the actual useful life of the goodwill.

A charitably-minded business owner can donate all, or a portion, of their personal goodwill to an ACF Pooled Income Fund, and receive a generous charitable deduction and avoid all capital gains tax on the sale of the personal goodwill by the Pooled Income Fund to the buyer.

The sale proceeds are invested by ACF with the donor’s investment advisor and the investment income is paid to the donor and their beneficiaries for their lifetimes. Afterwards, the remaining assets in the Pooled Income Fund pass to the donor’s ACF Donor Advised Fund to support the charities of the donor’s choosing.

We welcome the opportunity to discuss with you how a gift of your personal goodwill might work for you in your situation.

Dan Rice