Is The Sun Setting In 2021 On Current Tax Benefits For Business Exits?

Now that the election is over and President Elect Joe Biden has will be the 46th United States President, there are proposed tax changes that you as a business owner should be aware of. Many advisors are taking a wait and see view on what changes will actually be enacted but we think that you should do your homework and make sure you are prepared.

What are the key points you should know?

  1. If any or all of the proposed tax changes are enacted, they could take effect retroactive January 1st 2021. Now as one of my colleagues, who is a tax attorney shared with me, the last time a tax change that was enacted was retroactive to January 1st was 1993. 
  2. With stimulus soon to increase past $3 trillion and a Debt to GDP deficit of 136%, it is certain that there will be some kind of tax increase needed to pay down debt accumulated over the past 4 years. 
  3. These proposed tax changes can impact your ability to amass wealth and transfer it to your heirs.

What are the key impact of the...

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Leveraging Powerful Tax Savings Strategies: Do You Know About Qualified Small Business Stock

 

If you thought watching your refund add up on Turbotax was fun, wait until you learn about Qualified Small Business Stock (QSBS). While this regulation—also referred to as Section 1202—has been around since the 1990s, recent updates to its legislation have made it much more attractive to entrepreneurs, investors, as well as some employees. Essentially, QSBS allows shareholders to avoid capital gains tax entirely upon the sale of their shares. This exclusion saves shareholders thousands, in some cases millions, of dollars in taxes.

QSBS can get complicated quickly, so let’s start with some key terms and an example:

  • Cost basis: the original value of an asset for tax purposes, usually the purchase price
  • Capital gains: the positive difference between the sale price of the asset and its original purchase price (cost basis)

In 2012, Paige founds Startup Inc. The company is valued at $2 million and Paige owns 100% of the shares. She pays $0.10/share so her...

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