Undervaluation can lead to future IRS challenge

Article Abstract:

Many family-owned businesses undervalue their assets when they draft agreements to sell the company. Since many of these families buy life insurance to pay for death taxes, insurers could end up paying for the errors if the Internal Revenue Service investigates the company. Section 2703 of the Internal Revenue Code requires businesses to value their assets at 'fair market value', but less than 5% of those in an Arthur Anderson & Co. survey did so.

Taxation, Valuation, Family-owned business enterprises, Family-owned businesses

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Consider discounting in transfer of estates

Article Abstract:

A family limited partnership allows gifts of wealth to be discounted. Insurance products are among the many types of assets allowed under this type of arrangement, although a family limited partnership cannot exist solely to control only life insurance-based assets according to the Internal Revenue Service. Further discussion of the advantages of family limited partnerships is given.

Analysis, Limited partnership, Limited partnerships, Wealth

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Consider taxes, cash flow in funded retirement plan; when owners of closely held businesses want to retire and need a stream of income, they should consider three funding approaches

Article Abstract:

A self-cancelling installment note, a private annuity and an installment sale are the three methods that a financial planner should outline to the owner of a closely held business who wishes to retire immediately. The business must, of course, have the necessary cash flow to fund the founder's retirement. The three approaches and their legal ramifications are explained in detail.

Methods, Financial planners, Close corporations, Closely held corporations, Retirement income

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