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Author | Message |
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keith Send message Joined: 18 Dec 10 Posts: 454 Credit: 9,054 RAC: 0 |
The owner of a family business producing widgets passes away. The business has been in the family for 30+ years as a sole proprietorship. The business has a value of assets of $50 million and employs 100 people locally and in delivery of product throughout the country. Two sons and two daughters stand to inherit the assets of land the property sits on, manufacturing equipment, delivery vehicles and property equally ($12.5 million each). They've all taken part in running the business for between the last 7 and 10 years with their single surviving parent, the owner. Upon disbursement of assets in the estate, they don't have the cash on hand to pay the state and federal inheritance taxes. Sale of the business or partial assets to pay the taxes could subject some or all of the employees to unemployment or the business to closure. Some say, "they should of seen this coming". The family did see this coming. There weren't any good alternatives from the tax attorneys based on current law and business conditions. What to do? |
soft^spirit Send message Joined: 18 May 99 Posts: 6497 Credit: 34,134,168 RAC: 0 |
Anyone with that size of a company usually incorporates, leaving family members as share holders. The corporation would live on, owe taxes based on profits. If someone was actually foolish enough to find themselves in that position, the answer is simple. Find a buyer for the property and lease it back. Write that off as a bad business decision. Janice |
Robert Waite Send message Joined: 23 Oct 07 Posts: 2417 Credit: 18,192,122 RAC: 59 |
I always enjoy a giggle when scenarios like this come along. The concern seems to be the plight of the poor employees by the way the story unfolds. Yes, we better not allow that awful inheritance tax or all the working people will be out on the street. LOL The bottom line is the family of the dead dude will still be filthy rich even after a tax of 75% on all monies, so don't weep for the poor little rich kids. I do not fight fascists because I think I can win. I fight them because they are fascists. Chris Hedges A riot is the language of the unheard. -Martin Luther King, Jr. |
Gary Charpentier Send message Joined: 25 Dec 00 Posts: 30608 Credit: 53,134,872 RAC: 32 |
What kind of corporation a C or an S? In any case the only source of funds is the sale of the business. If it is a corporation finding a buyer is out as they aren't going to want to have a bunch of family still owning a chunk. Kids loose their jobs for sure and the buyer knows it is a fire sale. He'll offer ten cents on the dollar for the whole thing. Of course tax has to be paid not on the sale price but the appraised value. The IRS sees to that as they want to stop any kind of cheating or kickback scheme. It leaves the kids bankrupt. As to finding a buyer, the IRS has a very short time period where the TAX has to be paid. Makes it hard to sell a business as a business, except at fire sale prices. Now if they don't find a buyer then there is no choice but to immediately close [fire everyone] and auction off the assets. The $30 million in goodwill on the books goes out the door. The $20 million of book value tangible assets may sell for $10 million less the 10% auction fee. Tax man takes 75% and the kids split what is left and have to look for jobs. |
soft^spirit Send message Joined: 18 May 99 Posts: 6497 Credit: 34,134,168 RAC: 0 |
If it is a corporation it is not part of the estate. It is its own entity by US law. There is no estate to settle. Janice |
Gary Charpentier Send message Joined: 25 Dec 00 Posts: 30608 Credit: 53,134,872 RAC: 32 |
If it is a corporation it is not part of the estate. It is its own entity by US law. There is no estate to settle. No wonder why we have the government we do when the people are so ignorant. |
soft^spirit Send message Joined: 18 May 99 Posts: 6497 Credit: 34,134,168 RAC: 0 |
honest answers to ridiculous questions. NEXT! Janice |
keith Send message Joined: 18 Dec 10 Posts: 454 Credit: 9,054 RAC: 0 |
Then by definition, it's not a "family business". Is that what you seek to do, ruin family businesses? |
Gary Charpentier Send message Joined: 25 Dec 00 Posts: 30608 Credit: 53,134,872 RAC: 32 |
Then by definition, it's not a "family business". I think she, like the majority of Americans, is simply ignorant of the realities of corporations. I doubt she or the average American could explain the difference between a C corp and an S corp, never mind an LLC. I doubt she or the average American could explain the differences between a publicly traded corp and a private corp. I know few Americans have a clue about the differences between a for profit corp and a not for profit corp. So anyone want to tell us why the IRS has no issue with the president of a C corp taking a $1 a year salary but will prosecute the president of a S corp for doing that? |
Robert Waite Send message Joined: 23 Oct 07 Posts: 2417 Credit: 18,192,122 RAC: 59 |
The owner of a family business producing widgets passes away. Keith You are the one who started this string with this opening sentence. I do not fight fascists because I think I can win. I fight them because they are fascists. Chris Hedges A riot is the language of the unheard. -Martin Luther King, Jr. |
keith Send message Joined: 18 Dec 10 Posts: 454 Credit: 9,054 RAC: 0 |
Why yes I did. My point being, inheritance tax can have a lot more impact than just getting the evil rich. It threatens jobs and small businesses. You giggle at it. I don't find it funny. |
soft^spirit Send message Joined: 18 May 99 Posts: 6497 Credit: 34,134,168 RAC: 0 |
The scenario is ridiculous. The assumptions inane. NEXT! Janice |
keith Send message Joined: 18 Dec 10 Posts: 454 Credit: 9,054 RAC: 0 |
Well, if you disapprove, then it definitely has to be a most awesome post! |
skildude Send message Joined: 4 Oct 00 Posts: 9541 Credit: 50,759,529 RAC: 60 |
Sorry not sure if you are looking at this as the Woe is the rich. Those poor rich people always getting screwed over by having their rich parents die. Businesses are incorporated so that the individual ownership is no longer bound to an estate but can be sold to the children and no debt from inheritance occurs. the whole idea you put forward is that people should be able to perpetuate wealth. How about going out and earning it instead of expecting the family fortune to take care of you. In a rich man's house there is no place to spit but his face. Diogenes Of Sinope |
keith Send message Joined: 18 Dec 10 Posts: 454 Credit: 9,054 RAC: 0 |
Has the government gone out and "earned it"? No. The person who worked for the money earned it and should decide, above all others, where it goes. |
Es99 Send message Joined: 23 Aug 05 Posts: 10874 Credit: 350,402 RAC: 0 |
Has the government gone out and "earned it"? No. The person who worked for the money earned it and should decide, above all others, where it goes. Does that mean I have the right to with hold the part of my taxes that go to fund war? Certainly if we are allowed to pick and chose where our money goes that would be the first thing I'd refuse to pay for. Reality Internet Personality |
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