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August 2015 Tip of the Month

BABY BOOMER ALERT

It's that time of year again Baby Boomers.  It's Thursday, August 13, 2015 but on Friday, August 15, 1969, Marty Abo and some 400,000 "close friends"  were at the Woodstock Music and Art Fair which we all know as just WOODSTOCK.   Attached is an article that appeared in the Courier Post commemorating the 20th anniversary of Woodstock and asking Southern New Jersey..."Where are they now?".  As an aside, at the time, Marty Abo represented the then publisher of this Gannett affiliate, The Courier Post, and we think he was responsible for out-joking Marty by placing the Woodstock commentary and Marty's picture below the headlines for that day concerning Megan's Law which was enacted soon after.  Thank you Bob Collins.

Enjoy your weekend... (and Marty still has three tickets for Woodstock if anyone wants to buy one).

Woodstock

Now on to our August 2015 Tip of the Month

When we are engaged as accountants by a new client or to provide an appraisal of a business, we occasionally confront a situation in which parents had made a sale of their business interest to their children.  Usually this occurs when the parents want to cash out but failed to obtain proper tax advice.  From a tax standpoint this is often the worst possible situation because:

* The children had to first earn and pay tax on the money used to purchase the business.

* The payments received by the parents are subject to capital gains taxes on the profit and income taxes on any interest on the unpaid balance of the sales price.

* The proceeds received by the parents become part of their estate where they can be  subject to federal estate taxes as high as 40% on the death of the second spouse but, even more problematic, state estate taxes (welcome to New Jersey).

There are many alternate options with respect to business transfers to the next generation that have far fewer adverse tax results.  Among them: gifting shares in the business to the children; paying children who work in the business in stock rather than cash, and recapitalization in which preferred stock is created and held by the parents for income while common stock with growth attributes is provided for the children. 

You can call Abo and Company, LLC to be part of the team and perhaps recommend legal and other such business advisors seasoned in this arena. Need a business valuation?  Call Abo Cipolla Financial Forensics, LLC.  Many families with closely-held businesses have business, estate and tax planning needs and seek our professional advice.  You've heard it...we like to claim "we know what we don't know" but, also, "we know who knows what we don't know".