Support our online development, and advance our onground research initiatives in free market economics, as we seek to showcase the brightest Next-Gen minds.
THE ME-P DISCLAIMER: Posts, comments and opinions do not necessarily represent iMBA, Inc., but become our property after submission. Copyright © 2006 to-date. iMBA, Inc allows colleges, universities, medical and financial professionals and related clinics, hospitals and non-profit healthcare organizations to distribute our proprietary essays, photos, videos, audios and other documents; etc. However, please review copyright and usage information for each individual asset before submission to us, and/or placement on your publication or web site. Attestation references, citations and/or back-links are required. All other assets are property of the individual copyright holder.
Understanding Physician Estate Planning
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™
A family business or medical practice may make up the majority of a physician’s estate. Unfortunately, although the practice does have value, it may have very little cash.
Recognizing the Dilemma
In recognition of the closely held business owner, the IRS allows stock in the company to be redeemed to pay federal and state death taxes, generation-skipping transfer taxes, and funeral and administration expenses.
There are few tax-deductible ways of getting money out of a corporation and salaries and business expenses head the list.
Example:
For example the IRS maintains that, if a business is at least 35 percent of your adjusted gross estate, the business owner can redeem stock to pay for approved expenses. Since you get a step-up in basis at death, the shares redeemed should not generate a capital gain.
The transaction is deemed a sale of a capital asset, and not a dividend. (A dividend is not deductible so it is taxable to the corporation as well as taxed to you personally upon receipt).
Assessment
The strategy of an Internal Revenue Code § 303 redemption is prudent. However, there must be cash available to redeem the stock. Typically, a life insurance policy is purchased to provide the cash for the redemption.
Conclusion
Please opine and comment if you have ever considered or used this strategy; and what was the result?
Book info: http://www.jbpub.com/catalog/0763745790/
Linguistics: www.HealthDictionarySeries.com
Related: Funding IRC Section 303 to Pay Estate Taxes and Expenses
http://www.nysscpa.org/cpajournal/1997/0597/depts/pfp.htm
Share this:
Filed under: Estate Planning | Tagged: Estate Planning | Leave a comment »
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 