Although the downturn in the economy has left many small businesses concerned over the decline the value of their businesses, Steven Fromm tries to outline a silver lining to a business' value decreasing. For those shareholders who have been looking for ways to minimize estate and gift taxes, the period after a slide in value can be a good time to think about gifting shares of your business. Fromm explains that because shares are worth less when the overall value of the business is down, individuals can gift more shares to family members without paying higher taxes on those shares than they would have before the value of the business dropped. Assuming the value of the business returns to its pre-recession level over the coming years, those additional gifted shares would have been made tax free. Fromm also lays out the tax discounts provided to minority interest holders as well as holders of shares that are considered unmarketable, as well as annual exclusions for gifts from a shareholder's spouse. Despite the overall decline in the value of the business in the short-term, Fromm provides ways to take advantage of the depressed economy to save a significant amount in future estate and gift taxes.
- Summary by FizzLaw Team
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The Silver Lining of a Bad Economy: Gifting of Shares of Stock in a Closely Held Business