Plain and Simple: Bright Business Insights Summer 2018 | Page 11

NO BETTER TIME LIKE THE PRESENT Tax Cuts and Jobs Act Creates Opportunity to Gift Your Multi-Generational Business The Tax Cuts and Jobs Act (TCJA) has been met with mixed reviews business including, but not limited to, estate planning, income tax since it was signed into law on Dec. 22, 2017. And while those of us in planning, controlling interests, voting rights, buy-sell agreements, the tax world continue to look to the IRS for additional guidance on a personal guarantees with your bank, etc. You will likely need help number of issues, there does appear to be some excellent news for those navigating the various issues and options that come with the gifting of you who are thinking about passing your business on to the next process. Working with a CPA, an attorney, banker and insurance agent generation in the next couple of years. will help ensure all your bases are covered. The great news is that the law has doubled the lifetime gift and estate tax Your Best Move exemption ($11.18 million per person and $22.36 million per married couple), effective for transfers made and decedents who have died after 2017. Unfortunately, similar to the changes that were made to the gift and estate tax exemption in 2001, this change is not permanent. But, hope remains. The House of Representatives is currently reviewing legislation that would extend most of the TCJA’s original provisions, including the lifetime gift and estate tax exemption. However, if the provision is allowed to sunset at the end of 2025, we can expect it to revert to the 2017 level of $5 million, plus inflationary adjustments. If passing your businesses on to the next generation is the cornerstone of your succession plan, there has never been a better time than the present. However, it’s important to note the significance of including a proper business valuation with your gift to ensure it meets the IRS’s standards. Your valuation should be performed by a credentialed valuator, which will help ensure that your gift will not be challenged long into the future. If the valuation attached to your gift meets IRS standards, it can only be challenged by the IRS three years after it was originally filed. On the other hand, if your valuation fails to meet IRS standards or is prepared Opportunity Knocks At least for the next several years, the higher lifetime gift and estate by someone who is not properly qualified, your gift can be challenged at any time in the future. tax exemption level creates a particularly great opportunity if you If you’re wondering about what your next move should be with regard would like to transfer your multigenerational business. Additionally, to your own succession plan strategy, give me a call at 330.308.6894 it’s a good time to consider large gifts of your business’s interest to to learn more. “lock in” the benefit of the higher exemption. In fact, you may have the opportunity to gift your entire business interest “tax free.” That being said, a word of warning … It’s not uncommon for future administrations to reduce the exemption level prior to its assigned sunset date. Therefore, if you believe your company will be more valuable in the future, you may want to gift now while the value of your business is lower. The benefit is that any future growth in value can accumulate outside of your estate. Regardless of your specific strategy, planning is critical. There are a variety of issues to be considered when gifting some or all of your by: Mark Fearon, CPA, CGMA Principal 122 Fourth St. NW, P.O. Box 1020 New Philadelphia, OH 44663 330.308.6894 [email protected]