rehmwa 2 #26 June 28, 2004 QuoteQuoteDo you mean put all th eproperty in a trust? No, that would encounter the gift tax. Form a partnership or corporation and make them owners of the business. Aaah, those 'loopholes' that you earlier mentioned that the filthy rich use. Or was it "tax shelters"? ... Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants Quote Share this post Link to post Share on other sites
PhillyKev 0 #27 June 28, 2004 It's not a loophole, it's the way the tax law is designed. It is designed to tax personal wealth, not to penalize people for having a family business. If the people with the family business are too stupid to use the options they have available to secure their business, then that's their own fault. Thought you were one of those proponents of survival of the fittest and whoever works hardest and smartest desrves the best? If they're too stupid to do the right thing, then I guess they'll have to live with their familiy inheriting a small fortune instead of a larger fortune. Quote Share this post Link to post Share on other sites
lawrocket 3 #28 June 28, 2004 Kev: This stuff that you are talking about is the reason for the 1986 Tax Reform Act. Remember when Reagan and his cronies like Rostenkowski in the House and Packwood in the Senate lowered the marginal tax rate (tax break for the rich) and eliminated several of the loopholes and tax shelters? Putting these things into a corporation does not mean that the taxes will not get paid. C corp? S Corp? You know, if the corporation buys stuff, it can get taxed, too. If I die, and my stock in the corporation gets sold, that's a capital gain, and my estate will get taxed for it. One way or another, it'll get taxed. I put my property into the corp, I'm gonna get taxed. My wife is hotter than your wife. Quote Share this post Link to post Share on other sites
PhillyKev 0 #29 June 28, 2004 QuoteIf I die, and my stock in the corporation gets sold, that's a capital gain, and my estate will get taxed for it. If you die, but your family were already the shareholders, no extra tax is paid. If they are just planning to sell your interest anyway, then the argument about destroying "family businesses" doesn't apply. Quote Share this post Link to post Share on other sites
lawrocket 3 #30 June 28, 2004 Kev: In most instances, stocks do not just disappear when a person dies. Let's say Phillykev forms, "Strippers and Beer, LLC." He, along with his wife and two adult children, each have 10 shares of stock in the LLC for a total of 40. Phillykev dies. The wife and two children have 30 shares, and there are ten shares now with a dead owner. The corporate bylaws determine what will happen. Typically, a right of first refusal will be made, wherein the stocks can be bought by the other shareholders. This is usually taxable. Or, the corporation can buy the stocks from his estate. Taxable, eh? Or, another entity can buy them from his estate. Same deal. Ahhh, but Phillykev was smart, and there is a right of survivorship in it. Okay, probate gift. Death tax. Maybe this last situation has a way of escaping taxes (I do not know, but sounds like it may). Still, one way or another, those taxes are gonna get paid either now or later. Interesting hypo, though. My wife is hotter than your wife. Quote Share this post Link to post Share on other sites
PhillyKev 0 #31 June 28, 2004 Right of survivorship will bypass probate but still counts as taxable assets at time of death. However, it's not hard to value their share below the current 1.5 million exemption if we're talking about small businesses. If we're talking about a 10million plus business, we're not really talking about small family businesses or farms anymore, are we? Quote Share this post Link to post Share on other sites
lawrocket 3 #32 June 28, 2004 QuoteIf we're talking about a 10million plus business, we're not really talking about small family businesses or farms anymore, are we? Sure we are. How much would 60 acres of farmland go for? A corporate asset. What about $200,000 machines? This is exactly the reason why farming is not farming anymore. It's "agribusiness" that only large corporations can really do well with. The days of the family farm are, pretty much, gone. Why? Because they have to sell. My wife and I probably have $50k in our business in just operating capital. This is a service industry that I am involved in. The guy who runs a machine shop as a tool and die maker can easily have 10 million in equipment. Payroll for a 10 man shop can exceed 500k per year quite easily. Think of the machines necessary for that? So Snuffy dies, has an 8 million dollar estate to leave to his kid (who runs the shop with him). Kid has to pay, let's say, 1 million in taxes. Even 500k in taxes. How does he do it? By liquidating whatever he can. That's how... My wife is hotter than your wife. Quote Share this post Link to post Share on other sites
PhillyKev 0 #33 June 28, 2004 QuoteSo Snuffy dies, has an 8 million dollar estate to leave to his kid (who runs the shop with him). Kid has to pay, let's say, 1 million in taxes. Even 500k in taxes. How does he do it? By liquidating whatever he can. That's how... First I'd find it hard to believe a machine shop or the like would own all of the equipment outright as opposed to leasing or financing it (in which case, it's not an asset), but supposing they did. Then they should have either already had the Kid be a majority stock holder or, better yet, I often hear those of you with this economic mindset blasting SS and saying people should prepare and save for the future. Well, Snuffy should have done the same and made sure as he purchased assets that he also put aside enough cash to cover the taxes, or else he should have leased. Quote Share this post Link to post Share on other sites
