Succession Planning after ATRA 2012 – Defined Benefit Plans

Fred M. Whitaker, P.C.'s Tax Planning Legal Blogs

Licensed for 27 years

Attorney in Newport Beach, CA

Fred M. Whitaker, P.C.

Free initial consultation, Credit cards accepted, Fixed hourly rates

Serving Newport Beach, CA

  • Serving Newport Beach, CA

  • Free initial consultation, Credit cards accepted, Fixed hourly rates

Managing Partner at firm Cummins & White, LLP

Serving Newport Beach, CA

Free initial consultation, Credit cards accepted, Fixed hourly rates

Awards AV Preeminent

The conclusion from analyzing ATRA 2012 was that in 2013 our goal in
preparing your business for the next level is to manage the ugly changes
to your tax brackets.  Last time we discussed Section 179 accelerated
depreciation for up to $500,000 of equipment purchasing and 50% bonus
depreciation, as ways to reduce income in the current year.

But what if you could take that one year effect and leverage it for the long term? 

Defined Benefit Plans and equipment leasing companies can help.  By
placing the new equipment in a leasing company that is not owned by you
or your spouse, (and/or selling your existing equipment to this new
company), your operating company will get a large tax deduction.  Your
new leasing company then takes the lease payments and pays salaries and
large contributions to a Defined Benefit Plan for you and any other key
employees select.  This provides large tax deductions for the leasing
company, while allowing the contributions into the Defined Benefit Plan
grow tax free until your retire.  The amount you can contribute into a
Defined Benefit Plan is determined by a combination of your age, salary,
and how much benefit you wish at a certain retirement age.  This amount
is much larger than can be contributed to a 401k  and by having it
outside the operating company in a company not owned by you or your
spouse, you do not have to offer it your employees.  You can adjust plan
benefits and contributions to fit your cash flow. Company sponsored
Defined Benefit plans also enjoy asset protection.

So, instead of taking accelerated deductions for buying equipment,
take it to the next level and set up a retirement plan just for you and a
new leasing company. Next time we’ll talk about the role Captive
Insurance can play limiting your tax burden.

___________________________________________________________________________________________

IRS Circular 230 Disclosure:
To ensure compliance
with requirements imposed by the IRS, we inform you that any U.S. tax
advice contained in this communication (including any attachments) is
not intended or written to be used, and cannot be used for the purpose
of (i) avoiding penalties under the Internal Revenue Code, or (ii)
promoting, marketing or recommending to another party any matters
addressed herein.

The conclusion from analyzing ATRA 2012 was that in 2013 our goal in
preparing your business for the next level is to manage the ugly changes
to your tax brackets.  Last time we discussed Section 179 accelerated
depreciation for up to $500,000 of equipment purchasing and 50% bonus
depreciation, as ways to reduce income in the current year.
But what if you could take that one year effect and leverage it for the long term?

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