Recently, our very own Matthew Eyet, Esq. talked with Rose Davidson, host of Talking with the Experts, a vodcast for business owners, about various hot-button business planning issues including Paycheck Protection Program (PPP) loans and estate tax under the new administration.
You can find the full conversation here, but we have put together a few key takeaways below.
Many businesses have applied for PPP loans, and issues with the first draw loans from the spring of 2020 are now in the news again as federal prosecutors have committed resources to going after fraud.
However, as Matthew emphasized, PPP loans aren’t the only type of loan out there. Economic injury disaster loans (EIDL) also exist, and businesses can qualify for both. In fact, between state and federal relief programs, there are many layers of support available to businesses. It’s possible for businesses to find relief from, five or more different local state and local federal sources.
Matthew and Rose also delved into estate tax and possible legal changes under the Biden administration.
Matthew explained step-up in basis, which has been receiving some press attention lately: If a farming couple in Iowa bought their land for $100,000, but it grows to be worth $10 million by the time of their deaths, then the asset of the farmland has appreciated significantly—yet there is no liquidity to pay the estate tax because it’s a farm. The step-up in basis means that the inheritors of the farm will not be taxed on the gains in value, so long as the property is held in the name of an individual until their death.
The reverse is also true: You can’t claim a loss if your property depreciates from $10 million to $100,000. “Hold on to the appreciated assets until you die and sell the ones that depreciated before you die,” Matthew advised.
Another area of concern when it comes to changing tax laws is the amount of the gift and Estate tax exemption lifetime, which are currently set at a gift of 11.7 million per person. If the value of your entire estate doesn’t exceed $11.7 million, then you don’t pay federal estate tax on it when transferring the assets to the next generation (although you may have to pay state tax). Married couples get to each use the unused portion of the other’s exemption. Once you cross the threshold, you’re facing a flat tax rate of 40%.
Fourteen years ago, the lifetime exclusion amount was only $1 million—a significant difference. Will the Biden Administration succeed in shifting the threshold again? We can’t say, but it helps to be prepared.
As Matthew and Rose discussed, there are many forms of federal and state relief available to businesses. If you have questions about loan forgiveness, especially if you didn’t have much in payroll expenses—or if you have questions about planning for changes in estate tax—then we recommend consulting a qualified professional such as Matt to help navigate the monies you will encounter through the process.
At Eyet Law, we offer concierge legal services by providing full-spectrum support for our clients in tax law, estate planning, business law, and civil litigation. Questions? Contact us.