Gift Tax Exemption for Owners: Time to take Advantage?

Are you an owner of an operating or holding company and interested in minimizing taxes?  Of course you are! Who wouldn’t be looking to minimize taxes?  An increased gift tax exemption of up to $5,120,000 is currently in effect but is expected to expire on December 31, 2012.  If you have considered gifting shares or ownership interests to children or other family members, now is the time to do it.  Before the increased exemption expires you can make a large gift in 2012 without owing any gift tax, while this same gift made in 2013 may result in significant taxes.

Before a transferor can take advantage of this exemption, a valuation of the company is required in order to determine the fair market value of the entity and therefore the value of the gift.  A few simple steps such as providing the necessary financial information and legal documents could result in significant tax savings.

The exemption also applies to estate tax and is also scheduled to expire on December 31, 2012.  An estate of a decedent, who has died in 2012, may be completely exempt from the estate tax imposed on that estate.

The gift and estate tax exemptions are expected to fall to $1,000,000 as of January 1, 2013.  Anyone that is considering transferring wealth to children or other beneficiaries or has experienced the loss of a loved one in 2012 should consult with their tax advisor on the tax savings they may be entitled to.

Kriste Rodriguez is a Senior Manager in the EisnerAmper’s Forensic, Litigation and Valuation Services Group with over 10 years of experience in business valuations and matrimonial disputes.

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