Share sale or asset sale. LCGE in Canada or FIRPTA withholding in the US. GST/HST on goodwill. Section 754 step-up. The structure that minimizes the seller's tax is rarely the structure that minimizes the buyer's risk — and the gap between those two answers is the real work.
Tax structure on a cross-border dealership transaction is not one decision — it is four interlocking ones, each with a different optimum on each side of the border.
Canadian sellers favor share sales for LCGE access. US buyers favor asset sales for step-up. The standoff is structural — how to bridge it is the work.
Canadian sellers of US dealership equity face 15% FIRPTA withholding on gross proceeds unless a withholding certificate is obtained pre-closing.
Canadian dealer principals can shelter up to $1,016,836 (2026) of capital gains on qualified small-business shares. Three eligibility tests must hold for 24 months pre-sale.
US partnerships and S-corps can elect a basis step-up on partner change. Material to the buyer's post-acquisition depreciation schedule.
Every cross-border dealership transaction starts with one structural question: is this a sale of shares (Canadian seller) or stock (US seller), or a sale of assets? The optimum answer differs on each side of the border.
Canadian sellers overwhelmingly prefer share sales. A qualifying share sale unlocks the Lifetime Capital Gains Exemption (LCGE), which shelters up to $1,016,836 of capital gains per individual (2026 indexed limit). For a husband-and-wife operating partnership, that's over $2M of tax-free proceeds. Asset sales do not access the LCGE.
US buyers overwhelmingly prefer asset sales. An asset sale gives the buyer a stepped-up basis on the underlying goodwill and physical assets, generating amortization deductions over 15 years under IRC §197. A stock sale gives the buyer the seller's historical (often fully amortized) basis — no future deduction stream.
Bridging the gap usually involves either a partial price adjustment (the buyer pays more for the tax cost the seller absorbs by converting to asset structure), or structural workarounds: a Canadian section 88 bump, a US section 338(h)(10) election that creates a deemed asset sale within a stock transaction, or hybrid structures where real estate moves separately from the operating company.
The Foreign Investment in Real Property Tax Act (FIRPTA) imposes a 15% withholding on the gross proceeds when a non-US person disposes of US real property interests — which, for dealerships, includes US-located dealership real estate and shares of US Real Property Holding Corporations (USRPHCs).
For a Canadian dealer principal selling a US-located dealership with associated real estate, that's 15% of the entire purchase price withheld at closing, regardless of actual tax liability. The withheld amount is creditable against US tax owed — but only after filing a US return and waiting for refund.
The work-around is a FIRPTA withholding certificate filed with the IRS pre-closing, supported by a calculation of expected actual tax. If approved, withholding drops to the actual tax amount. Processing time: typically 90 days, sometimes longer. Plan accordingly.
The Lifetime Capital Gains Exemption is the most consequential single tax tool for Canadian dealer principals selling a qualified small business corporation. To qualify, three tests must hold for the 24 months leading up to the sale:
Most operating dealerships satisfy the first two tests naturally. The third is where preparation matters — share transfers within 24 months of sale (estate freezes, restructures, family gifts) can interrupt the holding period and disqualify the LCGE.
When a US partnership or S-corp dealership changes hands, the buyer can elect under IRC §754 to step up the inside basis of partnership assets to fair market value. The election creates new amortization and depreciation streams for the buyer over the assets' remaining lives.
For a buyer acquiring a US dealership with significant goodwill (typical), the section 754 step-up is often worth low single-digit millions in post-acquisition tax savings. For Canadian buyers acquiring US dealerships, this is the single most important reason to consider US-based holding structures rather than direct Canadian-corp ownership.
Canadian asset sales of a "business as a going concern" can qualify for a section 167 election that suspends GST/HST on the transaction. The election requires that substantially all the assets used in commercial activity transfer, and that the buyer is registered for GST/HST. Section 167 is the difference between a fully-taxed transfer and a tax-deferred one — on a $50M dealership sale, section 167 saves the buyer $6.5M in immediate GST/HST.
Cross-border buyers acquiring Canadian dealerships need GST/HST registration in place before closing. The registration process takes 4–8 weeks for a non-resident; don't leave it for the week before closing.
Coussa Group runs the full lifecycle — valuation, NDA-bound buyer process, regulatory review, OEM consent on both sides — as a single coordinated workstream.