Asset Sale or Stock Sale? The Double Tax on a C Corporation
If the buyer wants the assets rather than the stock, what does the second layer of tax cost, and what price would make up for it? Every piece below can be linked to, so it opens in a window on your reader's screen, current as of the record. No form to fill in.
2026 law · Reviewed September 7, 2026 · The full page, with methodology and sources · the terms · All tools
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The price, the corporation's basis in its assets, your stock basis, and your rate; what you keep under each route, the double-tax cost, and the asset price that would make the two equal. In a frame it carries no cookies, no tracking, and a visible link back to the methodology. Your site has to allow frames; most do. The link that opens it in a small window is on the professionals page.
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- In plain words.
- A C corporation is taxed as its own person. If it sells its assets, it pays corporate tax on the profit, and when it hands the rest to you, you pay tax again on the money over what your stock cost. If you sell the stock instead, you pay once. Buyers often prefer to buy assets, because they get to depreciate what they paid. This tool takes the price, what the corporation's assets cost, what your stock cost, and your rate, and shows both routes side by side with the gap between them.
- Why it matters.
- The first thing a buyer's letter of intent says is whether it is an asset deal or a stock deal, and the difference can be a fifth of the price. Knowing the gross-up, the higher asset price that leaves you even, is what lets you answer.
- An example.
- A corporation sold for $5,000,000 with $1,000,000 of basis in its assets and $500,000 of stock basis, at 20 percent plus the surtax: an asset sale leaves about $3,289,000 after $840,000 of corporate tax and $871,000 at your level. A stock sale leaves $3,929,000. The double tax costs about $640,000, and an asset buyer would have to pay about $6,063,000 to make up for it.
- Where it stops.
- It models a C corporation only, with no state tax, no election to treat a stock sale as an asset sale, no losses carried into the year, and no exclusion for qualified small business stock. An S corporation pays one level of tax and is a different calculation.
The facts
Six quotable sentences on the two ways to sell a C corporation.
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- A C corporation that sells its assets pays the 21% corporate rate on the gain over its basis in them (§§ 1001, 11(b)). When it then distributes what is left in liquidation, the shareholder pays the gains rate on the distribution over the stock basis (§ 331). That is the double tax.
- A shareholder who sells the stock pays once, at the gains rate on the price over the stock basis. The corporation's assets keep their old basis in the buyer's hands, so the buyer gets no fresh depreciation from the price paid (§ 1012 applies to the stock, not the assets).
- Example: a corporation sold for $5,000,000 with $1,000,000 of basis in its assets and $500,000 of stock basis, at 20% plus the surtax: an asset sale leaves $3,288,920 after $840,000 of corporate tax and $871,080 at the shareholder level; a stock sale leaves $3,929,000. The double tax costs $640,080.
- To leave the seller where a stock sale would, an asset buyer would have to pay $6,063,291 in the example, a gross-up of $1,063,291. That gap is what the buyer's stepped-up basis is worth in the negotiation.
- An S corporation or a subsidiary can be sold as stock with a joint election to treat the deal as an asset sale for tax (§ 338(h)(10); § 336(e)), giving the buyer the step-up with one level of tax. A C corporation with outside shareholders cannot: for it, the choice is real.
- The 3.8% surtax reaches the gain on C corporation stock and on a liquidating distribution whether or not the shareholder worked in the business (§ 1411(c)(1)(A)(iii) excepts only assets of a trade or business the taxpayer runs, and stock is not one). Qualified small business stock held five years may be excluded instead (§ 1202).
The two routes in the example
Each layer of tax under an asset sale and under a stock sale, and what the shareholder keeps.
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| Step | Asset sale | Stock sale |
|---|---|---|
| Sale price | $5,000,000 | $5,000,000 |
| Corporate tax at 21% on the gain over the inside basis | $840,000 | None |
| Distributed to the shareholder in liquidation | $4,160,000 | Not applicable |
| Shareholder tax at 23.8% on the gain over the stock basis | $871,080 | $1,071,000 |
| Total tax | $1,711,080 | $1,071,000 |
| What the shareholder keeps | $3,288,920 | $3,929,000 |
| Price that leaves the shareholder equal | $6,063,291 | $4,160,000 |
Cite and link.
The clean address, a citation generated from the record so it can never carry a stale review date, and an address for every section so you can point a reader at the exact table or method.
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- Link
- https://consideratecapital.com/tools/asset-sale-or-stock-sale
- Citation
- Considerate Capital, "Asset Sale or Stock Sale? The Double Tax on a C Corporation," reviewed September 7, 2026, https://consideratecapital.com/tools/asset-sale-or-stock-sale.
Link to a section
- The calculator https://consideratecapital.com/tools/asset-sale-or-stock-sale#calculator
- The facts https://consideratecapital.com/tools/asset-sale-or-stock-sale#facts
- The two routes https://consideratecapital.com/tools/asset-sale-or-stock-sale#key-numbers
- How the double tax works https://consideratecapital.com/tools/asset-sale-or-stock-sale#how-it-works
- Methodology https://consideratecapital.com/tools/asset-sale-or-stock-sale#methodology
- Sources https://consideratecapital.com/tools/asset-sale-or-stock-sale#sources
- Revision history https://consideratecapital.com/tools/asset-sale-or-stock-sale#revision-history
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