Bob's personal wealth including investments in land, stocks, and bonds is about $14,000,000. He reported an interest income of $20,000 and dividend income of $6,000 last year. The $14,000,000 includes land worth $9,000,000 that Bob bought in 1966 for $450,000.
Bob has hired your firm for professional advice regarding whether he should operate as a sole proprietor, a partnership, an S corporation, or a C corporation. He is also considering transferring a possible 40% interest in his new business to his daughter Mandy, age 23 and single.
Please assist with the following using the above information;
Identify the tax consequences on the sale or exchange of the land consistent with the capital gains rules
Describe the after tax effects on the client's cash flow based on teh sale ofthe land. Consider including the capital gains tax rules.
Tax authority needs to be included or at least what to look for