The Trump administration is exploring a $100 billion tax break, which would primarily apply to the richest people in the U.S.--and that includes entrepreneurs who want to sell a business.

On a basic level, the idea involves introducing inflation into the formula for calculating capital gains taxes. In other words, you'd translate your cost basis--that is the amount you paid for a long-held asset--into today's dollars or next year's dollars, should you sell in 2019. That could, in effect, lower your tax liability should you sell stock or perhaps even a business at a profit.

Here's an example: If you bought a business for $100,000 in 1980 and wanted to sell it today for $1 million, you would be taxed up to 20 percent on the $900,000 gain. If the president's plan goes through, however, your $100,000 outlay, adjusted for inflation, would tick up to about $300,000, so you would be taxed on only $700,000.

It's good news for business owners who are ready to sell and retire or start a new venture. In fact, data from BizBuySell.com, an online marketplace for business sales, shows that there was a 5 percent increase in active listings in the second half of 2018, compared with the same period last year. Their findings also show that 32 percent of all current small-business owners plan to sell within the next two years.

An analysis from Wharton suggests the proposed tax break would mostly benefit high-income households, because that's where capital gains tend to accrue. It is also unclear when--or if--this new tax break will pass. Steven Mnuchin, the U.S. Treasury secretary, recently said his department is exploring whether it has the tools to pass it without going through Congress. Even if the Trump administration is able to bypass Congress, however, many expect a legal battle to ensue over the measure.

Published on: Jul 31, 2018