FACTS:
MJ Stone, a single man and long time client who is always in the highest tax bracket, came into our offices in a panic. He was concerned about the recent election of Donald Trump as President of the USA and how that will affect his year-end tax planning. Specifically:
1) MJ has an annual salary of $3,000,000. His company wants to pay him a bonus of $1,000,00 in 2016 but he could put it off until early 2017.
2) MJ has some stock that he has had for about 10 years that he wants to sell for a gain of $1,500,000. Should he sell it in 2016 or 2017?
While he was discussing his year-end planning, he also mentioned that he has been working with an estate attorney to try and get his estate taxes down. The attorney recommended gifting 25% of his stock in MJ Corp. to his children in December 2016. MJ owns 100% of MJ Corp. and it has a fair market value of $25,000,000. The attorney claimed that MJ will not have to pay any gift taxes on the transaction because a gift of 25% of MJ Corp. qualifies for a minority interest discount and lack of marketability discount and therefore MJ can use up his untouched Unified Credit.
ISSUE:
What advice would you give him regarding the $1,000,000 bonus?