One‑Page Deal Tax Checklist (Washington Sellers)

Purpose: To help Washington business sellers and their advisors identify tax‑sensitive deal issues early and ensure they are addressed consistently across the LOI, purchase agreement, and ancillary documents.

A. Seller Profile and Threshold Questions

• Is the seller an individual or trust treated as an individual for Washington tax purposes?
• Is the seller domiciled in Washington in the anticipated year of closing?
• Is there any realistic plan for the seller’s residency or domicile to change before closing, and if so, when?
• Is the seller eligible for any Washington capital gains deductions or exemptions (including the qualified family‑owned small business deduction)?

B. Transaction Structure

• Is the transaction structured as a stock (equity) sale, asset sale, or deemed asset sale (Section 338 or similar)?
• For asset or deemed asset sales, which assets are expected to generate capital gain versus ordinary income?
• How does the structure impact Washington capital gains excise tax exposure versus exposure under the millionaires’ tax (if closing in 2028 or later)?

C. Timing and Recognition of Income

• Will all consideration be recognized in the year of closing for federal tax purposes?
• Is installment sale treatment possible and intended, and does the purchase agreement support that treatment?
• Are any payments genuinely contingent, or are they economically fixed but deferred?
• Do escrows or indemnity holdbacks change tax recognition timing, or do they simply secure payment?

D. Purchase Price Allocation

• Is there an agreed allocation of purchase price across asset classes?
• Does the allocation increase or decrease Washington capital gains excise tax exposure?
• Does the allocation shift value into ordinary income that may increase exposure under the millionaires’ tax?
• Does the agreement include a binding covenant to report consistently on IRS Form 8594 and state filings?

E. Earn-outs and Contingent Consideration

• Are earn-out payments treated as additional purchase price or as compensation?
• When and how are earn-outs earned and vested?
• Can earn-outs create multi‑year income recognition, or will they be treated as fixed purchase price at closing?

F. Employment, Consulting, and Non-compete Arrangements

• Are sellers required to enter into post‑closing employment or consulting agreements?
• How are compensation, bonuses, retention payments, and non-compete payments characterized?
• Are these amounts clearly separated from purchase price in the documents?
• Has the Washington tax impact of ordinary income versus capital gain been modeled?

G. Credits, Elections, and Compliance

• Will the seller owe Washington capital gains excise tax, and if so, has the interaction with the millionaires’ tax credit been modeled?
• Is a Washington pass‑through entity tax (PTET) election relevant for any owners?
• Are there credits available for taxes paid to other jurisdictions?

H. Documentation and Reporting Consistency

• Do the purchase agreement, disclosure schedules, and ancillary agreements reflect consistent tax characterizations?
• Are there tax cooperation covenants addressing information sharing necessary for Washington filings?
• Are indemnities appropriately allocated for re-characterization risk by taxing authorities?