Possible Tax Changes under a Biden Administration – Business Owners Should Act Now!
Capital Gains Tax
The Biden administration proposes increasing the long-term capital gains tax rate from 20% to 39.6% which would substantially reduce the after-tax proceeds on the sale of a business. It is an opportune time for business owners to recapitalize or sell their businesses.
Estate and Gift Taxes
The Biden tax plan also contemplates a reduction in the exclusion amount for estate and gift taxes, from $11.58 million per person to $3.5 million ($23.6 million per married couple reduced to $7 million) and an increase in the tax rate from 40% to 45%. Advisors should encourage clients to use the maximum amount of their exemption in 2021. There are many effective long-term estate planning strategies currently available that take advantage of low interest rates including: Grantor Retained Annuity Trusts (GRATs), Charitable Lead Annuity Trusts (CLATs), and sales to Intentionally Defective Grantor Trusts (IDGTs).
Litigation is Heating Up in the New Year
Business Interruption Claims
Enduring weeks of forced government shutdowns is difficult for any business to withstand. Many businesses will have to file business interruption insurance claims to be made whole. Chaffe & Associates, Inc. regularly prepares and reviews calculations of lost revenue and profits. Our professionals have the experience and qualifications to provide schedules used for substantiating claims that can withstand scrutiny.
Economic uncertainty and forced business closures depress business values. While these circumstances are generally viewed as unfavorable, lower values may present an opportunity for shareholder redemptions and restructuring. Chaffe & Associates, Inc. has decades of experience in business valuations and expert witness testimony in these matters.
It is anticipated that there will be an uptick in divorce filings as a result of the pandemic. Often the value of a privately held company is the largest area of dispute in the property partition. Chaffe & Associates, Inc. has decades of experience in business valuations and expert witness testimony to assist your client with their needs.
Increased Scrutiny and Battles Surround Intellectual Property
Resulting Chaos from Pandemic Increases Impairment Charges
Few companies were left unscathed from the uncertainty and volatility in the markets over the past year from the pandemic. As a result, increased impairment charges are likely to be taken this year as companies evaluate the downward pressure on business values and investments. Chaffe’s CPA/ABV, ASA-BV/IA, and CEIV certified professionals have the required expertise for impairment testing.
Intellectual Property Litigation on the Rise
Intellectual property (IP) is often a company’s or individual’s most significant asset. In disputes over the ownership or an alleged infringement of an IP asset, the owner of the IP may be entitled to monetary damages. Whether the IP is a trademark, patent, trade secret or other form, Chaffe can assist in preparing damages calculations and expert testimony.
Mergers and Acquisitions Post-Pandemic: Can troubled businesses survive?
Was your business perfectly positioned for sale before the pandemic hit, and now it is left scrambling for capital to meet debt payments or pay expenses? Not all hope is lost. There is capital available for middle-market companies. For those who are not ready to exit, there is a silver lining! Read on to learn more.