Select Page

Wealth Conservation: Reducing Wealth and State Tax Through Annual Gifts to ChildrenTAX STRATEGY PROBLEMPedro Bourbone is the founder and owner of a highly
successful small business and, over the past several years, has accumulated a
significant amount of personal wealth. His portfolio of stocks and bonds is
worth nearly $5,000,000 and generates income from dividends and interest of
nearly $250,000 per year.With his salary from the business and his dividends and
interest, Pedro has taxable income of approximately $600,000 per year and is
clearly in the top individual marginal tax bracket. Pedro is married and has
three children, ages 16, 14, and 12.Neither his wife nor his children are employed and have no
income. Pedro has come to you as his CPA to discuss ways to reduce his
individual tax liability as well as to discuss the potential estate tax upon
his death.You mention the possibility of making gifts each year to his
Explain how annual gifts to his children will reduce both
his income during lifetime and his estate tax at death.