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).
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.
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.
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.
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TaxesIf you're not sure what gift taxes are, read on and we'll explain.
RetirementLearn about a strategy that could help you reduce taxes, diversify your portfolio and generate income.
InsuranceDecrease the value of your taxable estate and prevent the tax man from getting you one last time.
Financial AdvisorThe Treasury department is aiming to close a loophole that would result in higher estate and gift taxes for some wealthy business owners.
Financial AdvisorEstate planning is not just for inheritance. High net-worth individuals, who plan properly, can gift their money and save on taxes.
Personal FinanceAttempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
InvestingBuying private businesses is a good way to have greater control over your investments while increasing your income and avoiding the fluctuations of the market.
Small BusinessLearn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.