Selling Your Company With Minimal Capital Gains Reply

Selling Your Company
With Minimal Capital Gains
Related Matters Newsletter
Winter 1996

by Kevin M. Flatley, Esq.
Private Bank at Bank of Boston

Some years ago, two brothers came to my office intent upon selling their business. They each were to receive $1 million and were prepared to pay what today would be a 28 percent federal capital gains tax including better than a ten percent capital gains tax to the Commonwealth of Massachusetts. This meant a $300,000 tax payment from each of them.

Instead of paying this tax, they simply sold all their corporate assets and the buyer also bought their corporate name. This left them with a “personal holding company,” the remains of their old company, but with a new name. The personal holding company held nothing but cash.

Our first reaction is that this is no bargain for these individuals; they will be taxed twice on their income, once at the corporate level and a second time as the income is paid to them as dividends. Further, we assume that eventually someone is going to pay the capital gains tax. Our two brothers, however, never paid taxes on their income at the corporate level; and when they died some years ago, the death resulted in the forgiveness of all capital gains. The reason is that the brothers took advantage of two major benefits of the tax law. More…

Medical Savings Accounts

Medical Savings Accounts

by Bernard Fruchtman, Esq.
(This article is excerpted from TaxTalk – Plain & Simple)


Since Jan 1, 1997 small businesses and self-employed persons have been allowed to establish Medical Savings Accounts (MSAs).

MSAs are like IRA’s for medical expenses. Contributions are put into an account and invested. The money canbe withdrawn from the MSA to pay qualified medical expenses.

MSA’s can only be established by businesses with no more than 50 employees and self-employed persons. It’s a pilot program and only open to 750,000 taxpayers. It’s first come first served so the early bird will get the worm. No new MSA’s will be allowed after 750,000 are established More…