1. D

All of the above are true statements. Kevin's taxable gift is FMV less sales price, or $500,000. Kevin has a taxable gain of $100,000 ($500,000 consideration less $400,000 basis).

2.
B

The gift or sale leaseback involves the transfer of the business property by the seller, and then a leaseback of the property by the seller from the new owner in order to continue the operation of the business interest.

3.
A

The primary difference between a private annuity and a SCIN is that a private annuity is an unsecured promise to make lifetime income payments; whereas, the SCIN is a secured promise to make lifetime payments. Both pay income for life, cancel at death and remove the asset from the seller's estate.

4. B The buy-sell agreement is a business continuity agreement that is put in place while the owners are still alive and running the business. At the death of the owners, the new owners take over the operation of the business. Assets are not removed from the estate and buyers are already predetermined in the buy-sell agreement.

5.
C

The purpose of the intra-family loan is for the younger family member to have access to cash (loan) to buy the business interest from the senior family member. The senior family member loans the money (at an interest rate applicable to the current federal rate). Ownership of the business changes interest and is removed from the estate of the original owners. The loan recipient must pay interest on the loan or the IRS will treat the transfer as a taxable gift.



Introduction

Related Articles
  1. Managing Wealth

    5 Reasons Small Business Owners Sell Their Companies

    Selling a business you've built from scratch isn't done lightly. Consider these moments when the opportunity might be right for you.
  2. Managing Wealth

    How to Lend Money to Family and Not Regret It

    It’s hard to refuse a family member’s request for a loan, but be sure to go into such arrangements with your eyes open.
  3. Taxes

    What Are Gift Taxes?

    If you're not sure what gift taxes are, read on and we'll explain.
  4. Financial Advisor

    How to Gift Your Way to Lower Estate Taxes

    Estate planning is not just for inheritance. High net-worth individuals, who plan properly, can gift their money and save on taxes.
  5. Financial Advisor

    Family Business Estate Tax Loophole Could Be Closed

    The Treasury department is aiming to close a loophole that would result in higher estate and gift taxes for some wealthy business owners.
  6. Personal Finance

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
  7. Investing

    4 Ways Millennials Can Buy Private Businesses

    Buying private businesses is a good way to have greater control over your investments while increasing your income and avoiding the fluctuations of the market.
  8. Personal Finance

    Getting Government Loans For Your Small Business

    Would a government loan provide a more cost-effective way to finance your business? See whether your company qualifies for a government loan.
  9. Small Business

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  10. Financial Advisor

    How Life Insurance Can Help With Liquidity

    Life insurance can provide liquidity in personal and business situations when access to capital is essential. Learn how to utilize its unique properties.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center