hard · Certified Financial Planner Risk Management
The four equal partners of Salazar LLC, currently taxed as an S corporation, have received an updated appraisal valuing the business at $12,000,000. Each partner has a basis of $100,000. They currently use an entity redemption buy-sell agreement funded by term life insurance.
Which of the following is the most appropriate next step for the planner to take regarding the buy-sell arrangement?
- Calculate the exact tax liability for a survivor under the current entity redemption structure.
- Recommend converting the entity redemption agreement to a cross-purchase agreement to ensure a basis step-up.
- Identify the partners' individual goals regarding business continuity and estate liquidity.
- Advise the partners to increase the face amount of the existing entity-owned policies to $3,000,000 each.
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