How a CPA Helps You Handle Tax Provisions in a Sale Contract

When you’re selling your business, the headline price matters—but what really determines your net proceeds is how the deal is structured and how the tax language is written into the contract.

Nearly 70% of business owners say they underestimated the tax impact of selling their company.
(Source: Business Enterprise Institute)

Missed details can lead to unexpected taxes, post-closing disputes, or even audits.

That’s where we come in.

At Gilabert Hopkins LLP, we specialize in the tax side of business sales. We work alongside your attorney to help you understand what’s in the agreement, how it affects your taxes, and what you can do to protect yourself. Here’s how a CPA adds value during the negotiation process—and why it’s smart to bring us in early.

Helping You Choose the Right Deal Structure

Should you sell your company’s assets or just the stock (equity)? It’s one of the first big decisions, and the answer isn’t always obvious. Each option has different tax consequences. For instance, stock sales often qualify for long-term capital gains tax, which can be a better outcome for most sellers. But not every buyer is willing to go that route.

Our team helps you understand the pros and cons based on your situation. If the buyer requires an asset sale, we calculate your increase in tax and help negotiate additional sales proceeds, known as a gross up.

Once the terms are agreed, we work with your attorney to make sure your contract lines up with the structure that’s been negotiated—so that there aren’t any surprises later on.

Getting the Purchase Price Allocation Right (in Asset Deals)

If your deal is structured as an asset sale, one of the most important tax decisions you’ll face is how the purchase price gets divided among the various assets being sold. This is called purchase price allocation, and it directly affects how much tax you pay.

Too much allocated to items like equipment or inventory can trigger higher ordinary income taxes instead of lower-rate capital gains. That’s why it’s critical to get this right—not just from a tax standpoint, but also to ensure consistency between buyer and seller.

At Gilabert Hopkins LLP, we work with your attorney to build the agreed-upon allocation into the sale agreement and make sure it aligns with how both sides will report the transaction. It’s one of the smartest ways to avoid post-closing surprises and reduce your overall tax bill.

Uncovering and Fixing Tax Issues Before the Buyer Does

Before a buyer goes hunting for tax problems to use as ammunition to reduce the selling price or impose holdbacks, we do it first. We do a comprehensive review of your company’s tax history to spot any issues that might slow down—or even derail—the deal. This could include unpaid taxes, missed filings, blown S elections, or problems in how income or deductions were reported.

When we catch these early, you get a chance to fix them. We’ll provide a remediation plan for your approval. Eliminating tax problems early means the a buyer can’t use them as leverage to ask for a lower price, bigger escrow, or more indemnities.

Structuring Earnouts and Installment Payments Smartly

If part of your payment is tied to future performance (called an “earnout”) or paid over time, the tax treatment can get tricky. Without careful structuring, sellers often face higher taxes than anticipated due to how these payments are written into the agreement.

Our CPAs work with you and your deal team to structure earnouts and deferred payments in a way that may allow you to defer taxes, reduce the overall tax hit, or qualify for lower capital gain rates – depending on how the deal is crafted.

Making Sure You’re IRS-Compliant

In an asset sale, the IRS requires both buyer and seller to report how the purchase price is allocated across the assets sold—typically on Form 8594, filed after closing. But here’s the catch: both parties must report the same numbers.

During the contract review phase, we work to ensure the purchase agreement includes a clear, agreed-upon allocation that supports your tax position and matches what will later be reported on Form 8594. We also make sure the contract includes language requiring both parties to report the allocation consistently. Misaligned reporting between buyer and seller is a common audit trigger—we help you avoid that risk by getting it right up front.

Reviewing the Fine Print

There are several places in a sale agreement where tax language matters—and it’s not always in obvious places. These provisions can have a major impact on what you owe after the deal closes.

Working closely with your attorney, we review and help shape the tax-related clauses to protect your interests—not just the buyer’s. Key provisions include:

Tax indemnities – Who’s responsible if a tax issue comes to light from before the sale
Post-closing audits – What happens if the IRS (or a state) says you owe more after the sale
Purchase price adjustments – How working capital or other adjustments affect your tax reporting
Filing consistency – Making sure contract terms support how both sides report the deal on their tax returns

We don’t replace your legal counsel—but we make sure the tax side is covered, and that the contract language won’t come back to haunt you later.

Why It Matters

Taxes can quietly erode the value of a deal if they’re not addressed early—and properly. That’s why it pays to have a CPA on your deal team who specializes in M&A.

At Gilabert Hopkins LLP, we partner with your attorney to bring deep tax expertise to the table. We don’t just fill out forms—we review the contract itself to flag tax risks, explain what the language actually means for your bottom line, and recommend ways to structure the deal more favorably.

Our job is to help you make informed decisions, avoid costly surprises, and walk away with more after-tax proceeds. And we do it in plain English—not legal or accounting jargon.

Final Thought

Selling your business is a big step. A smart contract with the right tax provisions can make the difference between a good deal and a regrettable one. Involving a CPA that specializes in M&A early ensures you walk away with the best possible outcome—and fewer worries after the ink dries.

If you’re thinking of selling or already negotiating, now’s the time to talk to a CPA who knows how these deals work. Gilabert Hopkins LLP is here to help.