www.spencerfane.com Kansas City Omaha Overland Park St. Louis Jefferson City Scott Blakesley Jeff Crooks 2012 Tax Planning Strategies for Business Owners Peter Hartweger Bill High Jeff Crooks Doug Hubler Pete Hartweger Doug Hubler Bill High David Seitter
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www.spencerfane.com Kansas City Omaha Overland Park St. Louis Jefferson City
www.spencerfane.com Kansas City Omaha Overland Park St. Louis Jefferson City
Program Description
The team will cover important tax considerations impacting your business, including: • Income Tax• Medicare Surtax• Estate and Gift Tax• Charitable giving• Maximizing your overall business value
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Potential Tax Rate Increases Effective January 1, 2013
New Medicare Surtax of 3.8% on investment income of individuals with adjusted gross income over $200,000 and married taxpayers with adjusted gross income over $250,000.
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How will the Affordable Care Act (ACA) Impact Tax Payers?
The ACA’s revenue provisions impose a 3.8% tax on investment income for individuals with gross income of $200,000 or more and married tax payers with gross income of $250,000 or more per year.
The ACA revenue provisions will also impose a 0.9% Medicare health insurance tax.
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What can you do to protect your business?
If the tax increases apply to you, consider the following solutions: If you are considering selling your business in the near
future, make the sale before 2013. If you are selling your business and want to start a tax-
free transaction (1031 exchange, merger, reorganization), elect now to recognize all gain.
If you are considering a sale with a deferred payment plan, require full payment in 2012 (future installment payments will be taxed at the new capital gain rate).
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What can you do to protect your business?
If you want to purchase a business that will be impacted by the rate increase, consider whether completing that transaction in 2012 would motivate sellers to negotiate a more favorable purchase price since sellers are currently paying lower taxes.
Since tax on dividends may exceed tax applicable to compensation, consider whether the compensation paid to shareholders is reasonable.
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Before After*
Giving $30,000 $330,000
Lifestyle $200,000 $200,000
Taxes $388,000 $268,000
Net cash flow for giving, saving, or investing
This table shows the impact of giving a 3% non-voting interest in a $10M family business (S-corp), with a $1 million of K-1 income.
*The “After” column sums $1.3M because the $300,000 charitable gift came from the company value, not out of the earnings. It represents just the first year, but the gift could be repeated annually for more giving.