These are the questions owners and families actually bring us. Each shows the options, the math under 2026 federal law, and the choice we'd test first. They're illustrative, and your facts decide the answer.
Wealth transfer · Health care
The clinic owner who wants to pass the building to her physician son
"My clinic does about $2.5 million and nets $650,000. I own the building through a separate company; it's worth about $3 million. My son is a physician and will take over. How do I give it to him without a huge tax bill?"
Building value$3,000,000
Her tax basis$900,000
Tax if she gifts it and he later sells$534,800
Tax if he inherits it, then sells$0
The options
| Option | What happens | Tax cost |
|---|
| Gift the building outright now | Uses $3,000,000 of her $15,000,000 lifetime exclusion. He takes her $900,000 basis, so a later sale is taxed on $2,100,000 of gain. | $534,800 |
| Keep it and leave it at death | Basis steps up to market value (IRC 1014). With an estate under $15,000,000 per person ($30,000,000 for a couple), no estate tax and no gain tax. | $0 |
| Hybrid: keep the building, give him a stake in the income | The building sits in an LLC that leases to the clinic at market rent ($240,000 a year). She gifts him a minority interest now, so he shares the rent and learns the asset, and keeps the majority until death so most of the value still gets the step-up. Gifted interests carry her basis, so the gift is kept small on purpose. | About $15,600 a year less family tax per $120,000 of rent shifted to a lower bracket |
| Large estate (over the exclusion): freeze the value | Sell LLC interests to an intentionally defective grantor trust for a note at the IRS rate, or use a GRAT. Future growth leaves her estate; she pays the trust's income tax, an extra tax-free gift. | Estate tax avoided on future growth |
What we'd test first
For most families under the $30,000,000 couple exclusion, gifting the building outright is the expensive move. It throws away the step-up in basis and can cost his family about $534,800 when he sells. Keep the building, hold it in an LLC that leases to his clinic at market rent, name him to inherit it, and give him a small stake now so he shares the income. If the estate is larger than the exclusion, the answer flips to a freeze: a sale to a grantor trust or a GRAT.
Any discount on gifted LLC interests must come from a qualified appraisal (IRC 2704; Treas. Reg. 25.2512). Rent must be market rate and documented. The estate attorney drafts the LLC agreement, the will or trust, and any transfer documents.
Equity compensation · Family wealth
The executive with stock options who wants a family real estate trust
"I have about $1.5 million of gain in company stock options. I want to move money into a trust that buys duplexes, pull some income for myself, and leave it to my children and grandchildren. How do I set this up?"
Option gain$1,500,000
Rate gap: 37% ordinary vs 23.8% long-term$198,000
Tax-free annual gifts (2 parents × 6 heirs)$228,000
First-year deductions on two duplexes$400,000
The options
| Step | What it does | Effect |
|---|
| 1. Exercise incentive stock options early and hold one year | Qualifying ISO sales are taxed as long-term gain, not wages (IRC 422). Exercises are staged across years to manage the alternative minimum tax. | Up to $198,000 less tax than selling at exercise |
| 2. Create a grantor dynasty trust | Fund it with shares or cash using the $15,000,000 lifetime exclusion and the generation-skipping exemption, so it can pass to grandchildren without a second estate tax. | Growth leaves the estate |
| 3. The trust buys duplexes | The trust is a grantor trust, so its income and deductions land on the parents' return. A cost segregation study on two $800,000 duplexes creates about $400,000 of first-year deductions (IRC 168(k)), usable against passive income or in a real-estate-professional household. | About $148,000 of tax value if usable |
| 4. Pay the trust's tax yourself | The parents paying the trust's income tax is not an extra gift, so every dollar of rent stays in the trust for the family (Rev. Rul. 2004-64). | A tax-free transfer every year |
| 5. Keep a path to income | A spouse can be a discretionary beneficiary (a spousal lifetime access trust), giving indirect access if needed. | Flexibility without pulling assets back |
What we'd test first
The order matters: convert the option gain to long-term rates first, then move appreciating assets out of the estate early, and let the trust own the rentals. The parents' annual-exclusion gifts of $228,000 a year can fund down payments with no gift tax, and the grantor-trust design keeps all rent compounding for the heirs.
ISO exercises can trigger alternative minimum tax; each year's exercise is modeled first. Non-qualified options are taxed as wages at exercise and do not get this treatment.
Exit planning
The owner selling the company in the next two years
"A buyer is offering $8 million for my company. I started it for almost nothing. How much will I actually keep, and what can I do before I sign?"
Sale price$8,000,000
Tax on a straight cash sale$1,785,000
Kept after tax, straight sale$6,215,000
The options
| Lever | How it works | Effect |
|---|
| Structure: stock vs. asset sale | Buyers prefer assets; sellers prefer stock. The allocation decides how much is taxed at ordinary rates (equipment recapture) vs. capital gain. | Often the largest swing in a deal |
| Qualified small business stock (C corporations) | Gain on qualifying stock held long enough can be largely or fully excluded, up to the statutory cap (IRC 1202, as amended in 2025). | Potentially tax-free up to the cap |
| Installment sale | Part of the price is paid over years; gain is taxed as payments arrive (IRC 453). | Spreads tax and can lower the top-rate exposure |
| Charitable remainder trust for part of the stock | Moving $2,000,000 of stock into the trust before the sale avoids immediate gain on that part (about $476,000), pays the owner an income stream, and produces a charitable deduction (about $88,800 of tax value, illustrative). | Defers gain, adds lifetime income |
| Opportunity zone reinvestment | Reinvesting gain in a qualified opportunity fund defers it, and growth on that investment can be tax-free after 10 years (IRC 1400Z-2). | Deferral plus tax-free growth |
What we'd test first
The planning window closes the day the letter of intent is signed. Model the allocation, test qualified small business stock eligibility, and decide on a charitable trust or installment terms before the deal is final. Afterwards, most of these levers are gone.
Charitable trust figures depend on payout rate, term and the IRS discount rate in the month of funding; shown as an illustration.
Real estate · Professionals
The physician couple who buys a vacation rental
"We earn over $900,000 in wages and pay almost 37% at the top. Everyone says real estate saves taxes, but our accountant says rental losses are passive and don't help us. Who is right?"
Property price$1,100,000
First-year deduction from cost segregation$261,800
Federal tax value at 37%$96,866
The options
| Path | Rule | Result for this couple |
|---|
| Long-term rental | Rental losses are passive and cannot offset wages unless a spouse qualifies as a real estate professional (750+ hours) (IRC 469(c)(7)). | Loss is suspended |
| Short-term rental (average stay 7 days or less) | Not a "rental activity" under the passive rules; if a spouse materially participates (for example, 100+ hours and more than anyone else), losses offset wages (Treas. Reg. 1.469-1T(e)(3), 1.469-5T). | About $96,866 of federal tax value in year one |
What we'd test first
Your accountant is right about a long-term rental. The short-term rental rules are the exception, but only with documented hours: we set up the time log and the cost segregation study before the first booking.
100% bonus depreciation applies to qualifying property acquired after January 19, 2025 (IRC 168(k), as amended in 2025). Recapture applies on sale.
Family · Education
The grandparents who want to pay for college now
"We have four grandchildren and want to set money aside for college while we're alive, without gift tax and without touching our lifetime exemption."
Per grandchild in one year (5-year election, both grandparents)$190,000
Four grandchildren$760,000
Tax-free growth at 6% over 15 years$1,061,384
The options
| Move | Rule | Effect |
|---|
| Front-load five years of gifts into each 529 plan | Each grandparent can treat one gift of up to $95,000 per grandchild as made over five years (IRC 529(c)(2)(B)). | $760,000 out of the estate at once, no lifetime exemption used |
| Pay tuition directly to the school | Tuition paid directly is not a gift at all (IRC 2503(e)), on top of the annual exclusion. | Unlimited for tuition |
What we'd test first
Superfunding moves the money out of the estate today, and all growth is tax-free for education. Tuition paid straight to a school is a second, unlimited lane.
No other gifts to those grandchildren during the five years without using lifetime exemption. Texas has no state income tax deduction for 529 contributions.
Retirement · Owners
The 58-year-old owner who wants out in five years
"I've put everything into the business. I'm 58, I have very little in retirement accounts, and I want to sell in five years. Is it too late?"
Cash balance contribution a year (age-based, illustrative)$250,000
Over five years$1,250,000
Federal tax deferred at 37%$462,500
The options
| Move | Rule | Effect |
|---|
| Add a cash balance pension to the 401(k) | Age-weighted contributions for owners in their late 50s and 60s can run several times the 401(k) limit (IRC 401(a), 412). | About $250,000 a year deductible |
| Roth conversions in the low-income year after the sale | Converting in a year with lower income fills lower brackets with tax-free retirement money (IRC 408A). | Locks in lower rates |
| Sale structure | See "The owner selling the company": allocation and installment terms decide the exit tax. | Coordinated with the plan above |
What we'd test first
It is not too late. It is the best time: a late-career owner is exactly who a cash balance plan rewards most. Five years of contributions can rebuild a retirement account while cutting tax at the top rate.
Contributions for staff are required; we run the census before recommending a plan.
Illustrative situations, not clients. Federal law for 2026: estate and gift tax exclusion $15,000,000 per person, annual gift exclusion $19,000 per recipient, 20% long-term capital gains rate plus 3.8% net investment income tax, 37% top ordinary rate. Valuation discounts require a qualified appraisal and are not guaranteed. Trust and entity documents are drafted by your estate attorney; ebotCPA designs the tax structure, runs the numbers and coordinates. Not legal or tax advice for your situation. Fees are fixed and quoted before work begins.
