How to Sell Your Business to Your Key Employee
With an Intentionally Defective Trust (IDT), owners can sell their businesses tax-free while protecting their buyers.
The trust is not recognized for income tax purposes. The result under the Internal Revenue Code is that every penny the seller receives is tax-free—no capital gains tax on the note payments and no income tax on the interest income.
• The trustee of the IDT can be instructed to keep possession of the non-voting and the voting stock (if in the trust). This way, if your beneficiary child gets divorced, his/her spouse will have no interest in the stock.
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