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Finance & Accounting
Can we pass our business down to our children for free without any tax consequences?
My husband is the sole proprietor of a business and I am the bookkeeper/receptionist. My two sons are HVAC techs and do the work that brings in the money. We are of retirement age and would like to just pass the business down to these sons instead of selling it to them. Would this be permissible with the IRS? Can we gift the business to them with no tax consequences to them or ourselves?

Asked by lneely
Posted: Thursday, March 27, 2008  |  Found in Finance & Accounting


More answers by Nina Kaufman
Answer by Nina Kaufman
A preliminary problem you have is that, as a sole proprietorship, your husband has no business to transfer. Whether the business goes to your sons or otherwise, if there's no separate entity, the business cannot legally exist without the owner (in this case, your husband). In addition, whether and how you can ultimately transfer an entity to your children tax-free depends on the form of entity, the (cost) basis in the entity, and your personal tax situation. I would suggest you consult with both an accountant and an attorney who are experienced in succession planning issues.
Nina Kaufman has a New York City-based boutique law practice and is president of Wise Counsel Press LLC, which produces legal information products for entrepreneurs. She writes the Making It Legal blog and the Business Law Advisor column for WomenEntrepreneur.com.

Note: This response is for your general information only. Be sure to consult with an attorney regarding your particular situation to get the advice you need.



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