Succession planning v exit planning: what’s the difference?

For business owners preparing for the next chapter in the business cycle, the terminology used by consultants can be a little confusing. Most owners believe that succession planning and exit planning are the same, but they are not. We offer the following descriptions of each term to assist those of you who are looking to …

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Can you defer the payment of estate tax?

According to Internal Revenue Code Section 6166, a personal representative (PR) may defer payment of federal estate tax if the decedent’s equity interest in a closely held business exceeds 35 percent of his adjusted gross estate. In order to be eligible for a Section 6166 election, the closely held business must qualify as an active …

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The Estate or Gift Tax Return is Filed with the IRS – Then What?

I attended the American Society of Appraisers Advanced Business Valuation Conference a couple of weeks ago and had the opportunity to attend a session presented by an IRS attorney, Theresa Melchiorre. I always jump at the chance to hear an IRS presenter, as I like to get a glimpse of what goes on behind the …

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99.7% of Estates Are Not Subject to Federal Tax

The American Taxpayer Relief Act of 2012 (“Act”) increased tax exemptions for federal estates, gifting and generation skipping trusts (GST). The Act also escalated the aforesaid exemptions each year for inflation. Below is a summary of the 2015 status of the three exclusions along with the ceiling for the federal estate tax rate applicable to …

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Will Your 2012 Gift Tax Return be Audited by the IRS?

In 2012 taxpayers and their advisers were scratching their heads about the presidential election and its impact on future gift and estate tax exemptions because the $5 million inflation indexed per person federal estate and gift tax exclusion was scheduled to drop to $1 million on January 1, 2013. Consequently, many wealthy matriarchs and patriarchs …

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Qualified Personal Residence Trusts

GIFT YOUR RESIDENCE TO YOUR BENEFICIARIES DURING YOUR LIFETIME, CONTINUE TO RESIDE IN IT AND SAVE TAXES WHAT IS A QPRT? A qualified personal residence trust (QPRT) is a trust typically designed to transfer a primary residence (*) to your beneficiaries during your lifetime which, if you elect, permits you to serve as the trustee. …

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Estate & Gift Tax Valuations: Can the IRS Disregard an Agreed Upon Value for Shares in a Buy-Sell Agreement?

Section 2703 of the Internal Revenue Code enacted in 1990 states that buy-sell agreements are disregarded for valuation purposes, unless the agreement satisfies the following tests. Test One: The Agreement Must Constitute a Bona Fide Business Arrangement The buy-sell agreement (Agreement) cannot be a ploy to transfer shares to members of the family at a …

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The Importance of Gifting in 2012

Gary Ringel was recently featured as a guest on What About Wealth? Internet broadcast on August 7, 2012.  What About Wealth? is a live Internet radio program and syndicated podcast on VoiceAmerica Business Channel hosted by Rich Bloomfield and Rick Durfee.  The subject of the broadcast was the latest news on gifting opportunities and the …

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A Huge Taxpayer Win in Favor of Formula Clauses

A recent U.S. Tax Court case (Wandry v. Commissioner, T.C. Memo 2012-88, March 26, 2012) highlights the usefulness of formula clauses in gift transactions. The taxpayers, husband and wife, made gifts to their children and grandchildren of interests in a family limited liability company. Their tax attorney advised them to make all gifts as a …

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