A business owner spent 20 years building a company worth $5 million. They found a buyer, agreed on a price, and were two weeks from closing. Then the deal died. Not because of the price. Not because the buyer changed their mind. Because of one mistake made years before the sale even started.
The Cleanup That Created a Hidden Tax Bomb
Years before listing the business, the seller did something smart: they hired someone to clean up the company. The idea was to pull out personal assets — investments, real estate, anything that wasn’t part of the actual business — so the company would look clean when buyers came knocking. Think of it like renovating a house before listing it.
The problem was the person who did the work. Their regular accountant handled the cleanup. Good at tax returns, great with year-end filings, but they had never done this kind of work for a business sale. And the way they separated those assets created a hidden tax problem — the same money was now going to get taxed multiple times. One pool of money, two or three tax bills stacked on top of each other.
Nobody caught it. Not the seller. Not the accountant. For years it sat there, invisible, until the buyer’s team found it during due diligence.
The Deal Collapses
I was representing the buyer on this deal. When we found the hidden tax risk, we told the seller: the only way we proceed is with a holdback of roughly a third of the purchase price — nearly $2 million — sitting in a lawyer’s trust account. CRA still had time on the clock to review the original cleanup. The tax return had been filed, and CRA had up to three years after that to come back and challenge it. Until that window closed, the risk was live.
The seller couldn’t accept losing access to $2 million for three years. The buyer couldn’t take the risk without it. Two weeks before closing, the deal was dead. Twenty years of building, months of negotiating, hundreds of thousands in fees — all gone because the wrong person did the cleanup.
The Pattern: Good People, Wrong Roles
This story is extreme, but the pattern behind it is common. The seller hired someone they trusted to do work that person had never done before. It happens at every stage of a business sale.
Pre-sale planning is where the biggest savings live. Cleaning up the company, setting up structures that let family members use multiple tax exemptions — these need to happen one to two years before a sale. If your accountant has never been through a deal, they may not know these options exist. You lose opportunities you didn’t know you had.
The letter of intent is where deal terms get set. Brokers are great at finding buyers and negotiating price, but their standard LOI templates often leave out critical tax terms — how the price gets allocated for tax purposes, non-compete tax treatment, loan terms, holdback provisions, and who pays if CRA shows up after closing. Once the LOI is signed, fixing these gaps becomes much harder.
Due diligence is the stage where the team mismatch becomes most visible. The buyer’s team typically includes deal-experienced accountants, tax advisors, and lawyers who have done this dozens of times. The seller’s team is often the regular accountant, a general practice lawyer, and the broker — potentially going through a deal like this for the first time. When there’s that gap, the buyer has all the leverage.
The purchase agreement contains promises about the company’s tax history. If your lawyer isn’t experienced with business sales, they may not push back on terms that are too broad. Years later, CRA reassesses something, and the seller is on the hook.
After the sale, CRA can still review the transaction. They can reclassify payments and send higher tax bills. If the purchase agreement doesn’t give the seller the right to be involved when CRA contacts the buyer, the seller has no seat at the table.
Your Accountant Isn't the Problem — The Roles Are
Every deal I work on, the client’s accountant is on the team. They have to be. They know the company better than anyone and are essential for diligence and the transition after closing.
The issue is putting them in a role they’ve never played before. Expecting a tax-return accountant to handle deal-level tax strategy is setting them up for a situation they’re not equipped for. The best accountants recognize this and say, “This is outside my area — let’s bring someone in who does deals.”
How to Build the Right Team
You need four people: your existing accountant for continuity, a tax advisor who does deals (pre-sale planning, deal structure, LOI and agreement review), a lawyer who does deals (agreement drafting, tax protections, representation rights), and a broker or investment banker to run the process. They need to communicate directly with each other, not through you.
Before bringing anyone onto your team, ask three questions. How many business sales have they worked on in the last two years? Have they ever cleaned up a company before a sale? Can they explain the tax difference between selling assets and selling shares in plain language? If they hesitate on any of these, they may be excellent at their day job — but this isn’t it.
The Real Cost
The cost of the wrong team isn’t always a number. Sometimes it’s $800,000 in avoidable tax. Sometimes it’s a $5 million deal that dies. But sometimes it’s what you never see — the planning that didn’t happen, the exemptions nobody mentioned, the cleanup that should have started two years ago. The real cost isn’t just what you lose. It’s what you never had the chance to keep.
This post is based on one of the episodes of The Advisors Table Podcast. Watch the full video on YouTube.
Related Videos:
- CRA Took $800K Because Nobody Told Him
- CRA’s 5 Most Dangerous Weeks (Now)
- CRA’s 3 Biggest Audit Targets in 2026
Sunny Jaggi is a CPA, CA, MTax, CFF, and Tax Principal at Cedar Consulting Group. He helps Canadian business owners and high-net-worth families navigate complex tax decisions — especially business sales, reorganizations, and estate planning.
The information in this article is for general educational purposes only and does not constitute legal or tax advice. Consult a qualified professional for advice specific to your situation.
