The short answer is YES; of course it takes money to make money. To make money in the stock market, you must have money to make the initial stock purchases. Starting a business requires money to buy inventory, marketing materials, office space and equipment. Even lottery winners have had to have the seed money.
Millennial! Another of those media driven buzzwords, used to label those between the ages of 18 and 34, while the term Gen Xers define those between 35 and 50 years of age. Boomers, the group to which I belong, are those 51 through 69. This post covers 8 key pieces of advice.
This is the fifth article in a five part series that reviews the Section 1042 Capital Gains Tax Deferral. In this last installment we will briefly discuss how to potentially eliminate capital gains taxes on proceeds from the sale of a business and we will discuss the summary points on a C-Corp vs. S-Corp sale. One of the more powerful uses of the Section 1042 capital gains tax deferral is the elimination of capital gains taxes in their entirety. This requires planning, but in certain circumstances, the seller may be able to entirely eliminate capital gains taxes on the sale of their business.
Elimination of Capital Gains Taxes under Section 1042
We mentioned earlier that the deferral of capital gains taxes using Section 1042 could be turned into the elimination of capital gains taxes in their entirety. This occurs when the seller holds the investment in QRP until death. At that time, the QRP passes on to the seller’s heirs with a step up in basis. As the basis in the assets is now equal to the value of the investments, there is no capital gain to tax and, therefore, no capital gains taxes due. Please note that the overall estate, including the QRP, may be subject to Federal or state estate taxes, unless some other exemption exists. Still, avoiding a 30% or more in capital gains tax remains attractive and offers significant savings.