Possible deduction for investment interest. Also, interest income distribution might be a dividend and subject to ordinary income tax rates at both the corporate and shareholder levels. 754 election is made to permit Buyer to allocate the purchase price to the partnership assets. Potential ordinary income tax issue to seller if inventory is appreciated in value. Interest received is ordinary income.
Buyer receives a current deduction for interest paid.
Seller may utilize a Keogh Retirement plan for consulting income and take ordinary and necessary deductions, including a home-office deduction. Same as 5b above. The purchase of a business can be an advantageous way to grow your business. However, purchasing intangibles while avoiding the stigma of a 15-year amortization will take careful planning. Buyers should consider using a consulting agreement for part of the purchase to generate a faster write-off.