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Section 303 plans can pave the way for continuing your business

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If you’ve spent years to build a successful business, it likely will comprise the bulk of your taxable estate. Naturally, you’d like to pass the company stock to the younger generation without a crippling tax hit.

Strategy: Set up a Section 303 stock-redemption plan. Assuming certain requirements are met, your company, estate and children will owe no tax.

Best of all, a Section 303 redemption enables your children to keep the family business and not sell it to strangers.

Here’s the whole story: Upon your death, the value of your business will become part of your taxable estate. Your heirs can convert the stock to cash by selling it back to the corporation (called a “stock redemption”). Since the stock’s value is stepped up on the date of death, generally, little or no capital gains tax is due on a sale occurring soon after death.

As a rule, a corporation’s stock redemption is treated as a sale or exchange. But if you and oth...(register to read more)

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