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4Q Business Planning

Many business owners are paralyzed by uncertainty over what the future may look like for their business and industry. But if you’re the owner of a closely held family business and are thinking about some form of retirement, you should consider taking advantage of a few tax provisions before the end of the year to help you, your company, and your family.

In the next 12 to 24 months, several tax laws will probably change. The lifetime gifting exemption of $5 million per person will likely be reduced and the long-term capital gains tax of 15% increased. In the fourth quarter of 2012, you can take advantage of current rates to start implementing the transition or sale of your closely held family business.

If your net worth is high enough, and your children are going to be taking over your company, then strongly consider using some or all of your $5 million gift exemption this year.

If you are planning to sell the company to someone in your industry and like the buyer and his or her price, talk to your financial adviser about selling before the end of the year to take advantage of the 15% capital gains tax.

Talk to your accountant about completely writing off equipment that you purchased this year, instead of writing it off over 5 to 7 years. If you plan to purchase a large amount of equipment in the next 6 to 12 months, you may want to speed up the process.

If you are thinking about making a loan to a family member, now may be the right time. Minimum interest rates for loans to family members for asset purchases are set by the IRS each month, and currently the rate is 1.4%. As national interest rates increase over the next few years, so will this low interest rate.

Finally, make sure that you have fully funded your tax deductible retirement accounts. This includes 401(k)s, 403(b)s, SEPs, IRAs, and other types of plans. If you just turned 50, the tax deductible amount that you can put away is higher than it was last year.

Before the end of the year, sit down with your business attorney, CPA, and financial adviser to discuss tax and business strategies. A wise man once said, “A good plan today is better than a great plan tomorrow.”


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