Questions???Questions??Questions?

What is the name of your state? Virginia

Commercial Property Appraised: $400,000 (6 Years Ago)
Since then a Chevy Dealership & a new apartment complex have been developed. Currently waiting for a new appraisal. It should come in around $500,000+. It is a pretty good location and has room for expansion. It is around 5,000 sqft and 12 years old. It is in very good condition.

Company Equipment:
· 10 Brunswick Gold Crown Billiard Tables: $25,000 (From The 1995 U.S. 9-Ball Championships.)
· Stock (Cues, Cases & F & B): $3000
· Kitchen & Bar Equipment: $5,000

Currently Operating about $5,000 above Cost of Overhead each month over the past 2 years. The current owners are operating as an LLC. They have not really tried to improve the business over the years. They just micro-manage the company and keep it real simple. I want to purchase the company and make upgrades in the F & B to create a steady follow of business. Use my Billiard Leagues & Tournaments to generate new business as well. The leagues & tournaments (With Pro Players & w/o) create a buzz and ensure nightly events.

They are offering the place to me for $425,000 after working on the price. I do not have good credit so finding the funds for the down payment makes it hard. So I have contacted some Local Bar Owners in town that might be interested in putting up the funds. But I have the feeling they might try to squeeze me out of the picture. Greed is everywhere I know that now (lol) but the current owners said that if it happens they would give me two weeks to match the offer. So now that I have tried to put a million words into a couple paragraphs (lol). Here comes the questions….

1) What would be the Capital Gain Taxes for them selling the business & property for $425,000?

2) If a lender wanted $42,500 down for a loan on the property & business @ $425,000. Is it possible to get the $42,500 for the current owners and get a loan for $470,000 (If the appraisal comes back above $500,000). Then the down payment would be $47,000. Use the $42,500 from the owners and my own $4,500 to make the required $47,000. THEN pay them $425,000 for the property & business and give them back the $42,500. Would they LOSE money on the $42,500 in taxes if so how much?

Breakdown:

Loan: $470,000 ~ Business & Property
Down Payment ~ $47,000

Current Owners ~ Give me $42,500 to help get it financed. I guess we would not tell the bank this part...lol.(Perhaps a closing cost loophole? I have no idea.) (They will be getting the money right back..)

My Own ~ $4,500

= $47,000 (For The Down Payment on a $470,000 loan)

Will the Taxes kill them for doing this with the extra $42,500? If so how much? Is it legal?

True Amount For Selling The Property & Company: $425,000
After they help me with the $42,500: $470,000

Please forgive me I know how to make a business successful. But my knowledge of taxes & financing are VERY VAGUE.

If you have any suggestions please reply. I can only hope it is in time.

Thanks,
Rookie….(lol)

[abezon]

I have no idea what their taxes would be. Their capital gain is their net proceeds from sale - what they paid originally (including later improvements). They will also have depreciation recapture, though I can't guess how much. You could get a commercial loan for 80% & carry a 20% owner-financed second mortgage. They may want to finance more of the sale, since this would spread out their capital gains over a few years.

If you go ahead with this deal, be sure to have an attorney set up the papers. You don't want to pinch pennies on a $425,000 deal.

Thanks for your advice on this subject.

Rookie