Business Interest Transfers: Gifts and Sales (Journal Article)

We consider how hard-to-value assets, particularly closely held business interests, might be transferred. Any transfer of a closely held business interest that may use a substantial portion of a client’s gift tax exemption should be structured with a defined value clause that specifies a fixed dollar amount for the value of the gift. If the value of the transfer is finally determined for gift tax purposes to be greater than the donor thought, the additional value should be transferred as a sale, acknowledged by both parties—donor and donee—and supported by appropriate documentation.

Author: Dennis C. Reardon, JD, LLM, CLU, ChFC, is the principal of Reardon & Associates, a law firm in Wayne, PA, where he specializes in tax matters related to estate, business, and compensation planning. He is a fellow of the American College of Trust and Estate Counsel and is a frequent speaker at professional meetings throughout the United States.

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