Legal Question in Business Law in California

That depends on the terms of the sale. Generally a going concern is worth significantly more if the name is sold with the business, but of course there are exceptions. When I have purchased businesses, I have always wanted the name to go with it.

I'm not sure what role the IRS has played here, or how that would affect the rights of the buyer and seller to negotiate as to whether the current business name is included or must be changed. Normally, someone buying a business is paying for the goodwill in addition to the tangible assets. Goodwill is defined as the expectancy of repeat business from past customers. Since continuity of name is an important part of that expectation, the name, if it is a good, respected name, is usually included in the deal and kept by the new owner. In a minority of cases, a name change may be beneficial. I would not change a name merely because it is the family name of the prior owner. I would change the name if the main value of the business is inventory and equipment and the old name has bad associations for potential customers. Again, I don't know what the IRS has to do with the deal, but if the business is being sold to settle a tax-liability question, that may affect the value of the name; and if the IRS has some legal or regulatory reason why it wants the name changed, you'd better comply.