My partner and I have verbally agreed to sell our business. My question is if we paid 100k for the business land and real estate and are getting 200k on the sale does how separate parts are valued affect our amount of taxes. The reason we are asking is the buyer has listed the value of the real estate much lower that we believe it is worth but has listed the building for double what we think it's worth. So the purchase price still comes to 200k. We would talk to our accountant about this but he is on vacation and wont return till august 2nd.

The new buyer is wanting to have a very high price on the facilities, equipment etc. so he has much higher depreciation to lower their taxes. The bad part of that for you two is that if you depreciated the equipment and facilities etc. then you pay the recapture on the depreciation you claimed. The values you placed or depreciated on those depreciable assets would be a good place for you to start in trying to have the sale more reflect reality. What you don't want to have happen is that both of you file very different values for the same assets. Income tax fraud is not a good place to be going. Around here many properties that are sold have low values for buildings and high values for land or lots. I don't know if that is your case or not.
The taxes on the increased value of land and facilities is capital gain tax which is much lower than ordinary income tax rates, however the depreciation claimed on those depreciable assets is all due the year of sale even if the business is sold over multiple years. After giving this more thought you should be okay from a depreciation aspect as those values were created whenever events occurred. The capital gains will be what you need to pay on and from a strictly capital gain aspect to you and your partner it really does not make any difference what the values are if you record your depreciation correctly and pay the capital gain tax. If you had made some relatively large improvements etc. to the equipment or facility recently and the value of the non real estate portion was lower you may have some capital gain losses to claim which could lower taxes for you, which you would lose if the current numbers would be used.
Bryce

What bblwi is spot on. Maybe I missed it but are you taking the money over a period of time?

We managed to talk to my personal accountant today. He explained the taxes much as bbwli did. It will not be as bad as we had thought. The payment will be a one time payment not over several years.

If you took the payment over a number of years would it lessen your tax obligation?

One way...or another..they're gonna find ya..they're gonna getcha getcha getcha...maybe next week.

The code allows for many ways to lower or forgo taxes on assets and incomes, so to me it is not inappropriate to also collect some taxes when assets are transferred. There a whole host of ways to minimize taxes or almost eliminate. Forming an LLC to transfer those assets would go a long way to to that but then it involves time, cost and leaving assets and monies in the business. At 200K between two parties to me paying the taxes and moving on makes the most sense to me with the least complications. I have been a party to creating transfer vehicles but they involved 3 or more parties and 10 to 20 fold the value of the assets to be transferred and there was not a desire for parties to be out quickly. One advantage of planning ahead.

Bryce