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36
MONEY

Those Nice Folks at the IRS
 

Business owners can engineer big tax savings when passing their company's stock, during their lifetime, to their kids.
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Leniency from the IRS means that business owners can now engineer big tax savings when passing their company's stock, during their lifetime, to their children.

For example: Imagine your company is worth $10 million, says Sarah Rothermel, a senior partner at the Boston law firm of Hale and Dorr. Previously, if you gave each of your two children a 20% stake, each would owe a 55% gift or estate tax on a $2-million transfer.

"Now the IRS is willing to grant minority status to family members who will own less than 50%" -- outsiders always had that tax break -- "so they can apply a minority discount, generally ranging from 15% to 50%, to the value of their stock," says Rothermel. Assuming a 30% discount, each child now owes tax on only a $1.4-million transfer. Consult your attorney to see if minority discounting might work for you.

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Last updated: Mar 1, 1994




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