I was invited to lunch last year, where I was asked to analyze the sale of an aeronautical company. The sale was in progress, totaling $3 million gross proceeds. I began working with his CPA, and we designed a plan that was extremely tax-efficient in regards to the taxes paid upon the sale of the business and the taxes he was going to pay on total income over the course of his life.
Here was the plan before I met with the business owner. Total business sale of $3 million, at a long-term capital gains rate of 20%. His Modified Adjusted Gross income was over $250k in 2024, so an additional 3.8% Net Investment Income Tax had to be applied for a total of 23.8% applied to the sale. His total expected tax liability was projected to be $714k from the gross proceeds of a $3 million dollar business sale. His net would be $2,286,000 to invest safely at 4.5% in bonds, market rate CD’s and treasury bills, for a total annual income of around $15k per month.
I designed an alternative plan, and his CPA reviewed and approved it. The new structured plan required him paying $50k from his $3 million business sale, which allowed him to invest $2,950,000, at the same 4.5% that he wanted his plan projected at. The new plan increased his retirement income from $15k per month to $26k per month for the rest of his life.
It always amazes me how many good things can happen, just from business owners getting together over lunch, and sharing ideas from their past experiences.