A search of the Internal Revenue Code reveals that the term “personal goodwill” is not mentioned anywhere in the code. Is personal goodwill a legitimate way to reduce taxes from the sale of a C Corporation?

Q: A search of the Internal Revenue Code reveals that the term “personal goodwill” is not mentioned anywhere in the code. Is personal goodwill a legitimate way to reduce taxes from the sale of a C Corporation? 

A: Absolutely. The Internal Revenue Code does not contain terms such as “personal goodwill”, “Solo 401(K)”, and many other terms that are commonly used as devices to reduce taxes for taxpayers. The term “personal goodwill” is a term that grew out of case law starting with The Martin Ice Cream Case. Since this case, personal goodwill contracts have become a commonly used vehicle to avoid unnecessary taxes.