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Buy-Sell Agreements When a business owner dies, there is a risk that the IRS will include his or her business interests into the gross estate as a value that exceeds the price at which it is actually sold to a new buyer. To reduce the possibility of such a hardship, many business owners enter into a buy-sell agreement, while they are still living. If the new buyer happens to be the business owner’s son or daughter, it is easy to imagine the parents directing his executor to sell that business to that child at a value which is far below market value. This would cause the estate to have a lower value and thus the government would collect a smaller federal estate tax. Therefore, buy-sell agreements between family members are generally subject to very close scrutiny by the IRS. The government recognizes the use of buy-sell agreements to peg the value of a business for estate tax purposes, so long as there is no abuse in the valuing of the business. |
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Copyright 1990-2010. Investment advisory services offered through Cambridge Investment Research Advisors, a reigistered investment advisor. www.FINRA.org, www.SIPC.org. Cambridge and Stahlschmidt Financial Group are not affiliated. All rights reserved. |
