9010 / What gift tax concerns apply in the family business context when planning for business succession?
In many cases, the retiring business owner in a family owned small business will want to transition the business to the owner’s children using a gifting strategy, rather than a traditional sale. Because the American Taxpayer Relief Act increased the top estate and gift tax rate to 40 percent for tax years beginning after 2012, avoiding this tax will often be a top priority for small business owners.1
Each taxpayer is allowed to exclude $13.61 million in 2024 (up from $12.92 million in 2023, $11.7 million in 2021 and $12.06 million in 2022) from transfer taxation during the taxpayer’s lifetime (gifts made during life and post-mortem are aggregated for purposes of determining the exempted amount).2
Further, a $18,000 (in 2024) annual exclusion is available for present interest gifts on a per donor/donee basis. This exemption was $17,000 in 2023 and $16,000 in 2022.