Business Exit Planning – Excel Empire

Reducing Capital Gains Taxes

“MAKE MORE-SAVE MORE-LEAVE MORE.” Excel Empire is dedicated to empowering CPAs, attorneys, financial advisors, real estate, and business brokerage professionals, as well as their clients, to minimize, defer, or even eliminate capital gains or income tax burdens. Our collaborative approach with partners increases bottom-line value by leveraging hidden opportunities within the tax code. With our proven solutions, you can walk away with more money when selling your business or real estate. Let us help you maximize your financial outcomes and leave a lasting legacy.

So you are ready to sell your business, but need help overcoming the taxes?

Not planning for Capital Gains?

Will it cost you too much to Sell?

Indeed, it can be perplexing to find yourself bringing new ideas and tax strategies to your accountant. Here at Excel Empire, we often encounter the question, “Why doesn’t my CPA know about this?” The reality is, the United States Tax Code spans thousands of pages, with only a handful dedicated to actually paying taxes. The majority of these pages outline legal strategies to avoid taxes altogether. Many CPAs primarily deal with a few major asset and capital gains issues throughout their careers.

While most CPAs excel at keeping their clients compliant and on schedule, they may not always be forward-thinking strategists. Comparatively, Excel Empire engages in daily conversations with individuals navigating the sale of appreciated assets. We understand the complexities and nuances of tax planning in these scenarios.

Consider it akin to seeking assistance with auto insurance from a life insurance agent. Excel Empire specializes in solving tax challenges triggered by the sale of highly valued assets, such as residences, investment properties, closely held businesses, or other qualified capital assets. Even if you find yourself in escrow or struggling with a failing 1031 exchange, we can still help you resolve tax issues while maximizing your profits upon closing escrow.

Don't take our word for it, Look at these recents success stories!

The owner of a long-held business, set to sell for $3.3 million, was stunned to learn from his CPA that he’d be liable for over $1,000,000 in federal and state taxes. This revelation meant he would only pocket slightly over $2.3 million when escrow closed. Faced with this significant tax burden, he made the decision to pause the sale of his business until he could find a solution to this tax dilemma.

Two planning solutions were identified to address the tax problem and maximize the amount he receives at the close of escrow.

The first planning choice enabled him to lawfully defer the taxes, resulting in him receiving more than $3 million compared to what he would have otherwise received after taxes.

The second planning choice involved eliminating the taxes entirely, saving him $1,320,000 in capital gains taxes. This option allowed him to receive tax-free proceeds of more than $3 million after the close of escrow. Additionally, he could establish a Wealth Replacement Trust for his beneficiaries, ensuring his legacy and providing for his loved ones in a tax-efficient manner.

Owner, Kentucky

A dentist was looking to sell his S-Corp practice for $2 million. Without any tax planning, he would have been faced with nearly $550,000 in taxes, leaving him with only $1,450,000 after covering the costs of the sale at the close of escrow

The doctor opted to sell the S-Corp as a stock sale, resulting in receiving $1,866,000 in distribution at the close of escrow—an impressive increase of over 30% compared to conventional planning strategies. Prior to consulting with EE, he had been advised by his CPA to simply pay the taxes.

Additionally, the new owners, amidst the challenges of the pandemic, reached out to Excel Empire and successfully received a recovery of $228,000 through the Employee Retention Tax Credit (ERTC).

Dentist, South Carolina

Some Of Our Strategies that allow you to legally, ethically and morally reduce capital gains...

Learn how to minimize or even eliminate taxes, even on significant capital gains, with a simple yet time-sensitive strategy—often the only one you’ll need.
Selling an appreciated asset can be exhilarating until you realize the hefty sum Uncle Sam wants to take. However, with the abundance of strategies available within the Internal Revenue Code, capital gains can become almost voluntary.
Discover how to avoid handing over up to fifty percent of your real estate gains to the government, and why your tax bill may exceed the twenty percent long-term gain you had anticipated. At Excel Empire, we leverage timing, combining, and sequencing strategies to mitigate substantial capital gains using other tax situations in your life.
Furthermore, we’ll guide you on the optimal entity structure for maximum asset protection. Most ultra-high-net-worth real estate investors utilize this same structure for its unparalleled protection.
With over twenty-three strategies at our disposal to reduce your capital gains taxes, our focus at Excel Empire is on your goals and objectives. By aligning your strategy with your desired outcomes, we’ll help you get closer to where you want to be financially.

maximizing your profit

Starts With A Plan

1

Get your Cap Gain strategy assessed

This first step is to make sure you know the real numbers when it comes to your taxes.

2

Exit Plan

Next Excel Empire will put together a comprehensive plan that is aligned with your goals and objectives.

3

Successfully Exit an Appreciated Asset!

Make sure you are in the know when exiting an appreciated asset. It is never about the money you make... it is about the money you keep!

Schedule Your exit strategy
Analysis call Today!

Click on the button to learn how much more you could expect to earn by having a well thought out plan and working with one of our advisors.

Just a few strategies

It’s impossible to cover all the diverse methods of divesting yourself of an appreciated asset without incurring capital gains and other fees on a single website. At Excel Empire, we boast years of experience in aiding business owners and investors as they exit their appreciated assets in manners that perfectly align with their goals and objectives.

While many service providers may stick to familiar or lucrative methods, we at Excel Empire prioritize doing what’s right for you, our client. We firmly believe that by prioritizing your best interests, we foster lasting relationships. Our hope is that you’ll become not just a client, but a friend, and that you’ll be inclined to introduce us to your circle of friends who may benefit from our services.

Tax Free Business Transition

Imagine you’re planning to pass on your appreciating asset or business to your beneficiary, with five or more years until you step out of the ring. What if your business could establish a tax-free retirement fund for you and your spouse while simultaneously boosting your business’s EBITDA? This strategy happens to be one of Excel Empire’s Founder’s favorite tools in the toolbox, particularly useful for buying out a partner or transitioning your business to your children or trusted employees.

Charitable Remainder Trust

Bypass capital gains and depreciation recapture on appreciated assets, increase income for life, and obtain an immediate deduction—all while benefiting charities. Capital gains and income taxes can be voluntary, and the IRS provides avenues for being charitable without disinheriting your family through legal, ethical, and moral trust strategies.

Enter the Charitable Remainder Trust (CRT). Since 1969, countless families have utilized CRTs to boost their income, reduce taxes, and support charities close to their hearts.

What does a CRT do?

A CRT allows you to transform highly appreciated assets like stocks or real estate into lifetime income while slashing income taxes now and estate taxes upon your passing. Notably, you pay no capital gains tax when the asset is sold. Additionally, you can contribute to one or more charities that hold special significance to you.

How does a CRT work?

You transfer the appreciated asset into an irrevocable trust, effectively removing it from your estate and eliminating estate taxes upon your death. Simultaneously, you receive an immediate charitable income tax deduction.

The trustee then sells the asset at its full market value, bypassing capital gains tax, and reinvests the proceeds in income-generating assets. Throughout your lifetime, the trust provides you with a steady income stream. Upon your passing, the remaining trust assets are directed to the charities you’ve selected—hence the name, Charitable Remainder Trust.

Charitable Lead Trust

A current income tax deduction can be obtained through the creation of a qualified living lead trust for a specified term. This involves transferring property to the trust, with a designated income amount paid to charity for the chosen number of years. After all income payments have been fulfilled, the trust principal, along with any accumulated funds, is returned to the original owner. This strategy is particularly effective for assets like Restricted Stock Units or Appreciated Stock.

Income Tax Charitable Deduction:

Upon funding the grantor lead trust, there is an income tax charitable deduction for the current value of the income designated for distribution to charity. This deduction is claimed in the year of the transfer to the lead trust. However, the donor is required to report all trust income, including the portion designated for charity, as taxable income on their tax return. To mitigate tax implications, many grantor lead trusts are funded with tax-free municipal bonds. Alternatively, some trusts are funded with appreciated stock, which may incur capital gains recognition during the trust’s term.

High Income Year:

Living lead trusts, where property is eventually returned to the original owners, are especially beneficial for individuals experiencing a high income year with anticipated lower income in subsequent years. This approach allows for the maintenance of a regular charitable giving pattern while maximizing the benefit from the charitable deduction during the high-income year.

Property Transfer Back to the Donor:

A qualifying grantor lead trust with the donor as the remainder beneficiary enables charitable giving without permanently relinquishing title to the transferred property. The donor surrenders only the right to income for the specified number of years, with all trust principal and accumulated income reverting to the donor after the term expires. This approach combines a current deduction with gifts to favored charities while allowing the donor to retain ownership of their property.

Tax Deferred Cash Out

The Tax Deferred Capital Outlay (TDCO) strategy is one of the most remarkable yet lesser-known methods available. Imagine the IRS granting you the opportunity to utilize your tax money for investment purposes over the next three decades!

Flexibility:

This strategy offers unparalleled flexibility, particularly beneficial for individuals seeking alternatives to traditional property exchanges. Instead of being constrained to like-kind exchanges, investors have the freedom to reinvest proceeds in business ventures or financial instruments of their choice, such as mutual funds, CDs, stocks, or annuities.

For instance, investors can opt to pay off debts on other investment properties or explore new business opportunities, thus diversifying their portfolio and maximizing returns.

Exit Strategy:

Many property owners are eager to transition away from the responsibilities associated with property ownership, such as tenant management. With TDCO, investors can divest their properties and redirect funds into income-generating financial instruments or passive income ventures, providing a seamless exit strategy from property ownership.

No Pressing Time Tables:

Unlike traditional 1031 exchanges, which impose strict deadlines for identifying and closing on replacement properties, TDCO offers investors the luxury of time. There’s no rush to identify replacement properties within a limited timeframe, allowing investors to wait for favorable market conditions without succumbing to time pressures.

Rescue a Failing 1031:

TDCO presents a lifeline for failing 1031 exchanges. By leveraging this strategy, investors can salvage failing exchanges before they collapse, thereby avoiding immediate tax liabilities and deferring taxes for decades.

No Replacement Loan:

Unlike 1031 exchanges, which mandate the replacement of debt on newly acquired properties, TDCO eliminates the need for securing replacement loans. Investors have the freedom to pay off existing debts and invest remaining funds as desired, without the constraints of debt replacement requirements.

Increased Depreciation:

With TDCO, investors benefit from increased depreciation advantages. By starting a new depreciation schedule upon acquiring a new property, investors can maximize tax benefits and capitalize on significant tax advantages over the long term.

Hedging

Our Tax Strategists often uncover additional financial opportunities within your existing tax situation, allowing us to implement strategies with minimal cost. This approach leverages elements already in play within your financial landscape, resulting in a streamlined and cost-effective implementation process.

Shifting

Income shifting, also referred to as income splitting, is a tax planning strategy aimed at transferring income from individuals or entities in higher tax brackets to those in lower tax brackets. This technique encompasses various methods to achieve tax savings and optimize tax liability.

One common approach involves transferring unearned investment income from high-income parents to low-income children, often facilitated through a trust structure. Another method is to shift income from high-tax bracket family business owners to lower-tax bracket relatives by employing them within the business and paying them salaries, which are deductible as business expenses if reasonable in amount and commensurate with work performed.

Additionally, family limited partnerships (FLPs) serve as a vehicle for income shifting, allowing business owners to transfer business assets to FLPs and subsequently distribute or transfer FLP interests to lower-tax bracket relatives through sales, gifts, or trusts. These strategies enable families to strategically allocate income and assets, potentially reducing overall tax burdens and maximizing tax efficiency.

ESOP

If your business operates as a C corporation, implementing strategic planning can allow you to sell your business to employees through an Employee Stock Ownership Plan (ESOP). An ESOP enables employees to become owners of the company, offering a range of benefits for both the owner and the employees.

From the owner’s perspective, selling to an ESOP provides a reliable exit strategy with captive buyers, eliminating the need to search for external buyers. It also serves as a rewarding opportunity for employees who have contributed to the company’s success. By setting a reasonable price for the sale, the owner receives cash from the ESOP transaction. Subsequently, the owner can reinvest the proceeds into other investments, deferring tax on the capital gains.

While the tax deferral benefits of an ESOP are not applicable to S corporations, owners of S corporations can explore the possibility of converting to a C corporation to take advantage of ESOP tax deferral opportunities. This strategic consideration allows S corporation owners to evaluate the potential benefits of recategorizing their business structure to align with their long-term financial goals and objectives.

Opportunity Zone

Owners who realize capital gains from the sale of their business or appreciated assets have an opportunity to defer taxes on those gains by taking action within 180 days of the sale. One strategy is to reinvest the proceeds into an Opportunity Zone. However, it’s important to note that the deferral is limited, as any gains must be recognized by December 31, 2026, or earlier if the interest in the fund is disposed of before this date.

Opting to hold onto the investment beyond this deadline can potentially result in tax-free gains on future appreciation. While an owner is not required to invest all proceeds into a Qualified Opportunity Zone (QOZ), the extent of tax deferral is adjusted accordingly. Detailed information about Opportunity Zones can be found on the IRS website.

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Here are some FAQ that might interest you

My CPA says that all these strategies will get me audited?

Indeed, it’s essential to prioritize strategies that are approved by the IRS when aiming to reduce tax liabilities. Using recognized and legitimate methods can lower the likelihood of being audited. However, it’s crucial to ensure that any tax reduction strategies employed are well-documented and based on sound financial principles. By working with Excel Empire you will be guided to adhering to these standards and you can successfully mitigate audit risks while effectively managing their tax obligations.

Why have I not heard of any of these ideas before?

The 1031 Exchange strategy for appreciated property is widely known and can be effective for initial real estate transactions. However, as investors engage in multiple flips or hold properties for the long term, relying solely on 1031 Exchanges may not provide a sustainable solution. This is where alternative tax strategies, such as those offered by Excel Empire, come into play.

Excel Empire specializes in providing innovative tax solutions tailored to real estate investors’ needs. These strategies go beyond traditional methods like the 1031 Exchange and offer diversified approaches to managing tax liabilities. By leveraging these new tax strategies, investors can optimize their tax planning, reduce future tax burdens, and achieve greater financial flexibility and efficiency in their real estate investments.

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