Small Business

Selling Personal Stock to Fund Buisness?

I am thinking about selling about 25K in stock that I own to purchase assets for a business. If I do this will I be able to avoid the capital gains?

Answer:

As a CPA, I came across this website and joined just last week, and I just came across your question.

Unfortunately, no, you will not be able to avoid the tax on capital gains. As you know, as long as you own the stock, you don’t pay any tax on unrealized gains. When you sell stock, you realize gains and pay tax. There is not an exception to that rule, just because you’re using the proceeds to purchase assets for a business.

Trying to think outside the box, even if you could contribute the stock to a business of yours and manage to get tax-free treatment on the contribution of the stock to the business, you’d still run into the same problem when the business tried to sell the stock to get the money to purchase assets. In that case, the business would have to either pay tax itself (at its marginal tax rate) on the capital gains or pass the gains to you and you’d have to pay the tax (depending on how the business was structured for federal income tax purposes).

It’s great that you’re trying to be proactive and find a way to save taxes, but I don’t think it’s a go this time.

Even though you cannot avoid the tax on the capital gains, you should consider depreciation on the assets your purchase for the business. That might help offset some of the tax on your gains. Just a thought.

I wish you the best in your endeavors.

Answer Provided by: Adam Dickreiter Adam Dickreiter
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