Houndogforever
Hot Rolled
- Joined
- Oct 20, 2015
- Location
- Boring
Selling the company was not an easy decision, originally the brothers had planned on passing it down to the next generation of de Caussins, but there were some problems. Fadal's cash was tied up in property, equipment, inventory, and accounts receivable, and the company was going to have to dip into profits to pay the 55% gift tax. That was an issue because profits were also being taxed 50%. Financial advisors told the brothers that $1 earned was going to be about $.25 cents in pocket once the transfer was complete. So, fearing the company's demise in a forced "fire sale" if the succession was unsuccessful, Larry and Dave decided it was best to sell the business outright. Fadal sold to G&L in April of 1995.
The death tax has contributed to the demise of the family owned business in the U.S. It will be interesting to see how Gene Hass makes his exit.
I have zero problem with Fadal and what or how they ran and sold their company. They did what was best for themselves at that time.
That being said, the estate tax currently is not anywhere close to as harsh as it used to be. I believe the lower limit is now over $12million before it takes effect.
Your comment about having to dip into profits to pay the tax tho. That is exactly how it is supposed to work. When you make profit, you pay tax. The money to pay the tax has to come from one of two places, profits or owners equity.