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Thomas McJD
Thomas McJD, Attorney
Category: Legal
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i am self employed ,i have an s corp . i am taking from my

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i am self employed ,i have an s corp . i am taking from my company 80,000 year salary
by the end of i will be having 45000 dollars , i want to take 20,000 dollars for my single k program
the rest i want to take as my profits ( since it will anyway go as my income) and give that money as gift to my kids they are only 5 and 3 years old . can i open an investment account for them in their name and give that money as gift?

TMcJD :

Hi, I will be happy to assist you, and it is my goal to make you a very satisfied customer! This may take a few minutes, so thanks for your patience.

Customer:

ok , i want details of tax as well

TMcJD :

Yes, you can gift up to $14,000 per person per year without gift tax consequences, so from a gift tax perspective you can certainly make the gift to your children. However, you should first consider creating a trust. Otherwise, it would be necessary to go to court and obtain guardianship/conservatorship over your childrens' property. That is because although you are the natural guardian of their person by being the parent, you are not the natural guardian of their property. Without guardianship over their property, there would be no one to control decisions. A trust would solve that problem without the need for guardianship and would be far more flexible. As far as income taxes -- if the salary you take is reasonable, then you can take out the rest of the money from the corporation as profits and avoid paying self employment tax - you would only need to pay income tax on that amount. And, as noted above, you would avoid gift tax because the amount going to each of your children would be less than $14,000 per child. If it ever exceeded that amount, you would need to file a gift tax return and use part of your lifetime unified exemption amount of $5.25 million.

Customer:

thank you very much , i am very satisfied with your answer

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You're welcome. Thank you for your question. Please let me know if I can help you with anything in the future. Have a great day!