Tax Efficient Corporate Exit Strategies

The Trouble with Exit Strategies

Much to the dismay of business owners, selling a corporation can be a revenue-positive event for taxing authorities. The classic corporate tax “success penalty” is amplified on the sale of highly appreciated company assets (such as business assets or real property). The proceeds will be taxed three or more times: once at the corporate level upon sale, once at the personal level upon distribution, and again at the estate level upon death. The pain increases in direct proportion to the number of dollars. Taxpayers spend enormous sums for legal and accounting advice to minimize or avoid these taxes.

The Target

The optimum solution would

  1. Completely avoid capital gains tax on the sale at the corporate level.
  2. Create a deduction instead of income and a tax efficient personal income stream.
  3. Completely avoid estate taxes at death, and
  4. Liberate dollars otherwise going to taxes to fund a tax-free benefit for heirs. The Optimum Exit does all this and more.

Optimum Exit

Instead of selling the asset:

  1. The corporation makes an S election
  2. Company gifts the appreciated property in exchange for a Charitable Gift Annuity (CGA)
  3. Tax deduction for gift flows through to shareholders
  4. CGA income flows through to shareholders
  5. Capital gains tax on sale is completely avoided
  6. Ordinary income tax on sale is completely avoided
  7. Estate taxes at death on asset are completely avoided
  8. Tax-advantaged guaranteed income for life
  9. Use dollars otherwise paid in taxes to secure tax-free benefit for heirs, and
  10. Charitable legacy in family foundation at death.