Ingram's July 2026

WEALTH MANAGEMENT

by Craig Novorr

A Succession Checklist for Owners

Given the complexity involved, experi enced financial and tax professionals should be consulted before pursuing this approach.

Detailed planning remains a must at a time when M&A energy is still running high. Merger and acquisition activity has remained strong in recent years. Part of this trend is driven by aging entrepreneurs seeking retire ment or succession plans, while another factor is the continued growth of private equity firms looking to acquire successful businesses. For many owners, however, selling a business creates more than just a liquidity event—it can also result in a significant tax liability. The good news is that proactive planning can help reduce, defer, or potentially offset a portion of those taxes. The most important factor is time. In general, the earlier you begin planning for an eventual sale, the more options you will have. While every situation is unique, the following strategies have become increasingly popular among business owners and their advisers. Direct Indexing Direct indexing allows investors to own the individual stocks that make up a market index, such as &P 500, Russell 1000, or Russell 3000. One of the primary benefits is tax-loss harvesting. Throughout the year, losing positions can be sold to realize losses that may be carried forward and used to offset future capital gains, including gains generated from the sale of a business. This strategy is most effective when implemented several years before a liquidity event, allowing losses to accumulate over time. However, during extended bull markets, portfolios can eventually run out of opportunities to harvest losses, leaving investors with appreciated holdings. Long/Short Strategies A more sophisticated approach is a long/short investment strat egy. Similar to direct indexing, these strategies seek to generate tax losses, but they incorporate leverage to increase opportunities. In a typical long/short portfolio, an investor may be 145 percent long equities while maintaining 45 percent short exposure. This can potentially generate losses regardless of market direc tion. If markets rise, losses may be harvested from short positions. If markets fall, losses may be harvested from long positions. Because leverage is used, losses can accumulate more quickly than in traditional portfolios. Ideally, a long/short strategy is implemented several years before a sale. However, many business owners have most of their wealth tied up in their companies and do not have the liquid assets necessary to fund the strategy beforehand. In those situa tions, implementation after the sale may be considered. If possible, closing a transaction early in the calendar year can provide addi tional time to generate losses that may offset gains. Business owners should carefully weigh the tradeoffs. Minimum investment requirements often range from $1 million to $3 million or more. The use of margin introduces additional risk, and while losses may offset gains from the sale of the busi ness, successful portfolios can also generate future capital gains that eventually create their own tax liabilities.

Charitable-Giving Strategies

Charitable planning can be one of the most powerful tools for reducing tax liabil ity associated with the sale of a business. One particularly effective strategy is donating a portion of the business interest before the sale occurs. By gifting appreci ated business interests to a qualified charity in advance of the transaction, an owner may avoid capital gains tax on the donated shares while also receiving a charitable income-tax deduction. Because a qualified charity is generally tax-exempt, it may be able to sell its portion without incurring the same tax consequences as an individual owner. Timing is critical. The gift must be completed before the sale becomes a binding obligation, making early plan ning essential. Another popular option is a donor advised fund. A DAF allows business owners to make a charitable contribu tion in the year of the sale, generating an immediate tax deduction. The assets can then be invested within the fund, and grants can be made to charities over time. Many owners use a DAF to "bunch" several years of charitable giving into a single tax year, maximizing deductions when they are most valuable. Other charitable strategies include direct gifts to charitable organizations and Charitable Remainder Trusts, which can provide an income stream for life or a speci fied term while ultimately benefiting charity. Selling a business is often the culmin- ation of decades of hard work. While a suc- cessful sale may create a substantial tax obli gation, advance planning can significantly improve the outcome. Whether through tax-loss harvesting, long/short investment strategies, or charitable planning tech- niques, business owners who begin plan- ning early typically have the greatest number of options. Working with a coor dinated team of tax, legal, and financial professionals can help ensure that more of the sale proceeds remain available to support future goals rather than being lost to unnecessary taxes. The Bottom Line

Craig Novorr is president and CIO of Paragon Capital Management in Overland Park, Kan. P | 913.451.6330 E | cnovorr@ paragoncap.com

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July 2026

Ingrams.com