The Six Approaches, Side by Side
These are not competitors so much as tools with different shapes. Several can be combined. What separates them in practice is timing — the column most presentations leave out.
| Approach | What it does to the gain | Latest it can be set up | What it really costs | Wrong for you if |
|---|---|---|---|---|
| Qualified small business stockIRC §1202 | Excludes qualifying gain from tax, within limits set by statute. | Years before. The holding period and eligibility conditions must already be satisfied. | Nothing ongoing — but the conditions constrained how you built and held the company. | You never held qualifying C-corporation stock acquired at original issuance, or the business is not a qualified trade or business. |
| Charitable remainder trustIRC §664 | Removes appreciated equity before sale; the trust sells without immediate tax and pays you an income stream. | Before the sale is binding. After that, assignment of income applies. | Irrevocable. The remainder goes to charity, and you cannot change your mind. | You have no charitable intent, or you need the full principal available later. |
| Installment saleIRC §453 | Nothing. It spreads the same gain across the years payments are received. | At the deal table — it is a term of the transaction itself. | Buyer credit risk for years, plus an interest charge on large deferred balances. | You need the proceeds now, or you do not trust the buyer's business to keep paying. |
| Qualified opportunity fundIRC §1400Z‑2 | Defers eligible gain, and can exclude the fund's own appreciation after a long hold. | Within a limited window after the gain is realized — so this one survives closing. | Liquidity. Capital is committed to a specific illiquid investment for a long period. | You would not make the underlying investment on its own merits without the tax benefit. |
| Tax-aware long/shortLoss harvesting at scale | Generates capital losses that offset the gain dollar for dollar. | Before, during, or after the sale. The only approach here with no structural deadline. | Three costs at once — management fee, financing cost, tracking error — plus an embedded gain that builds as losses are harvested. | Your gain is small, your horizon is short, or you have no plan for how the position eventually ends. |
| Pay the tax, invest the restThe benchmark | Nothing. You owe what you owe and keep full control of the remainder. | Always available. | The tax itself — and nothing else. No fees, no lockup, no counterparty, no unwind. | Rarely wrong. It is under-considered rather than over-used. |
Every figure that governs these — exclusion percentages, caps, holding periods, and rates — is set by statute and changes. This page points to the primary source for each rather than printing a number that may already be stale. Confirm the current rule with your own CPA before acting.
The Deadline Almost Everyone Misses
Sellers tend to think of the closing as the deadline. For tax planning it usually is not. The moment that matters is when the sale becomes sufficiently certain — in practice, the letter of intent.
The reason is a doctrine rather than a date. If you transfer appreciated equity to a charity or a trust after a sale is effectively locked in, the IRS can treat the gain as yours regardless, because you assigned away income you had already earned the right to receive. The same logic makes eve-of-deal entity conversions and ownership shuffles fragile: they need to be genuine and seasoned, not executed the week before signing.
Qualified small business stock. Eligibility is determined by how the company was organized and how the stock was acquired and held, all long before anyone is buying.
Charitable transfers of equity, entity conversions, gifting to family trusts, and most structural planning. A letter of intent is the practical checkpoint most sellers can point to, but the test is factual rather than a fixed date — the further along the transaction is, the harder these become to defend.
Installment terms, purchase price allocation, and the asset-versus-stock decision. These are negotiated, which means they are traded against price.
Qualified opportunity fund investment, within its statutory window, and loss-based strategies including tax-aware long/short. That is close to the whole remaining list.
The sequencing that fills the middle of this timeline — asset versus stock, purchase price allocation, state residency, the net investment income tax — is covered in detail in tax planning before a business sale.
Anything that changes how you own the business must happen before the sale is certain. Anything that changes what you own afterward can still be done later. Almost every disappointment in business-sale tax planning traces back to learning that distinction after the letter of intent was signed.
What Still Works After Closing
Once the deal is done the structural options are gone. Two things still work, and both operate on the money rather than on ownership.
A qualified opportunity fund can still take eligible gain within its statutory window. The discipline is simple: if you would not make that investment without the tax benefit, the tax benefit is not a good enough reason.
Loss harvesting is the other, and at the size of a business-sale gain that usually means a tax-aware long/short strategy. It manufactures capital losses deliberately and at scale.
Losses offset gains in the year they are realized. Losses generated next year do not reach back to a gain you recognized this year — under §1212 they carry forward, not backward. If a proposal appears to erase a gain you have already reported, ask which tax year the losses land in before you ask anything else.
You Cannot Buy This One Yourself
A tax-aware long/short strategy is a separately managed account, not a fund you can open on your own. It is reachable only through an advisor — and only where that advisor's custodian supports it.
Access is genuinely constrained right now, and not for marketing reasons. One major custodian stopped accepting new long/short accounts in 2026. Another kept them open but capped the leverage, set seven-figure minimums, and limited how much of any single firm's custodied assets can sit in these strategies at all. Whether an account can be opened for you is a question about your advisor's platform, and it has a real answer today.
Implementation varies more than the category name suggests. Two accounts described identically can differ in leverage, financing cost, tracking error, and how the position is eventually unwound. The unwind is the part most presentations leave out, and it is the part that decides whether the strategy was worth running. The questions that separate a real proposal from a pitch are worth having in front of you before the meeting, not after.
The Comparison Nobody Runs
Every strategy on this page should be measured against one alternative: pay the tax, invest what is left in a low-cost diversified portfolio, and get on with your life.
That benchmark is missing from most proposals, and its absence is not an accident. It is the only comparison that can make a sophisticated strategy look unnecessary, and it sometimes does. A strategy that clearly beats it — after every fee, financing cost, liquidity constraint, and the eventual cost of unwinding — deserves serious attention. One that is merely close is asking you to accept complexity, lockup, and counterparty risk for a result you could have had by doing nothing clever at all.
Asking for that comparison in writing is the fastest way to find out which kind you are being shown. The other seven questions worth asking are set out in how to evaluate a tax strategy proposal.
Two things worth holding onto. These are not really alternatives — one seller might qualify under §1202 on part of a position, take an installment note for part of the price, and harvest losses against the rest. And the largest determinant of what you keep is usually settled before any strategy is chosen: deal structure, purchase price allocation, which state you were resident in, how long you held what you held. Strategies applied late work with whatever those decisions left behind.
Which options are still open to you is decided by where you are in the transaction, not by which strategy is strongest in the abstract. Whatever is left, one test settles it: does it beat paying the tax and investing the rest, after everything it costs?
Find out which of these are still open to you — and whether the one you have already been shown is worth what it costs.