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| *Ostroff, Fair and Company>>>United States Taxes |
What are the gift tax implications of giving my son money to buy into a business? |
My son has an opportunity to buy into the business where he works. The lion's share of the purchase price, about $600,000 may come from placing a mortgage on a summer home I own. How can I mortgage the property and give him the money? What are the tax liabilities of such an arrangement and, if any, how should I go about structuring the transaction to minimize or avoid paying deal-killing taxes? Mortgaging your summer home home as no tax effect unless you default on the repayment. In which case, it will be sold and you'll pay capital gains tax on any increase in value since you bought it. You'll need to report the gift to the IRS as it is over $12,000. It might be better for you to set up a corporation to buy the business with you as the only shareholder. You can install your son as president and let him run it. The corporation can pay you dividends to cover the mortgage. Each year you can gift your son 5% of shares. Source(s): For more information, get the IRS Publication 950, Introduction to Estate and Gift Taxes, IRS Form 709, United States Gift Tax Return, and Instructions for Form 709. They are available at the IRS Web site at IRS.gov in the Forms and Publications section or by calling 800-TAX-FORM (800-829-3676). Start an LLC with your son and have the LLC buy the business. |
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