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Spoil the child, spare the surtax

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in Small Business Tax,Small Business Tax Deduction Strategies

Are you planning to sell your business in the next few years? Although you might owe a hefty income tax bill on the value of an appreciated interest, at least you may be able to dodge the new 3.8% Medicare surtax on net investment income that is scheduled to take effect next year.

But what about your kids and other family members who are shareholders in your business? They could get walloped by the surtax.

Strategy: Hire family members who are shareholders (if they don’t already work for the company). Keep them on the payroll until you sell the business.

As a result, when the deal is finally closed, the relatives should be able to squeeze through the same tax loophole as you, the business owner, pending clarification of the rules.

Here’s the whole story: Under the 2010 health care law recently upheld by the U.S. Supreme Court, a 3.8% Medicare surtax takes effect in 2013. The surtax applies to the lesser of net investment inc...(register to read more)

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