The Gift Leaseback strategy is like a clever move to make the most out of things your business owns. Imagine your business as a puzzle, with each piece being equipment or property. Some of these pieces get old and aren’t as useful, but what if there’s a way to give them new life and save money at the same time?
Here’s the idea: You can give something valuable from your business, like machinery or a building, to a family member who pays less tax. Then, you ask if you can still use it for your business and pay them for it. This payment is called a lease.
Why do this? Because it’s like a smart money move. When your business pays your family member for using the machinery or building, your business has to pay less in taxes. This means you save money on taxes.
On the other side, your family member gets some money from you as rent for the machinery or building. They have to pay some taxes on that money, but they also get to use a special rule called depreciation to lower the amount of money they pay taxes on. It’s like saying, “Hey, this machinery is getting old, so we don’t have to pay as much tax on the money it makes.”
In simple words, the Gift Leaseback strategy helps you give a new life to old stuff in your business while also saving money on taxes. Your business pays less in taxes, your family member gets some money, and everyone’s happy. It’s like finding a secret way to keep your business going strong and save money at the same time.
This article is intended solely for informational purposes and does not constitute legal, financial, or professional advice. Readers are advised to consult professionals in the relevant fields before taking any action to obtain personalized advice.