End of Year Strategies that Unlock Capital Gains and Tax

Tax time in 2022 may be months away, but New Year’s Eve is rapidly approaching. The fourth quarter is when you should consider some proactive tax preparation to improve your 2021 tax picture. For many of our clients, tax planning isn’t a once-a-year activity but also a strategy to set the business up for financial success in the year ahead.

Consider preparing for the upcoming tax season by taking advantage of a few important end-of-year tax strategies.


The Secure Act, passed in 2019, allows a company to establish an ESOP Trust in 2022, make a contribution relating to the company’s 2021 tax year, and claim a deduction on its 2021 tax return as long as these steps take place prior to the company’s income tax filing (including extensions).

Take action: If you are thinking of selling your company in 2022, consider starting the process early in the year to take advantage of the 2021 deduction and coordinating your tax filing timeline with your CPA.


Company owners that sell to an ESOP may be able to defer and/or eliminate federal and state capital gains taxes under section 1042. This allows a seller to collect significantly higher after-tax proceeds without having to negotiate a higher purchase price. In order to match the after-tax proceeds of a 1042 ESOP sale, a non-ESOP buyer would have to pay a higher multiple for the business. For example, a stock sale to a non-ESOP buyer that is subject to a 32.3% combined Federal and California capital gains rate would have to take place at a 9.93x EBITDA multiple to match a 6.0x EBITDA multiple in a 1042 sale.

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The Unlock by Lazear is a monthly newsletter designed to share helpful insights and tips on how to accomplish succession planning goals, connect the dots between exit strategy and healthy team culture, and how to capitalize on tax planning opportunities.

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