Mr. Howard Reed, a successful local contractor, would like your advice on the best way to achieve several desired personal results and minimize payment of federal income taxes. His business assets, exclusive of cash and accounts receivable, consist almost entirely of Internal Revenue Code (IRC) section1231 property. liquidate all his business holdings which are worth approximately $1,500,000. Net taxable income of $200,000 from investments and construction activities and that in retirement his annual net taxable income which will be derived from investments, will amount to approximately $60,000. Mr. Reed also estimates that the Internal Revenue Code (IRC) section1231property losses produced by selling his construction business will amount to approximately $50,000 and the Internal Revenue Code section 1231 property gains to approximately $160,000 for a net Internal Revenue Code (IRC) section 1231 property gain of $110,000.

Mr. Reed also feels that, in order to minimize his taxable estate, it might be desirable to transfer some property to his son and daughter either now or in the next few years What advice as to the effect of transferring: (1) construction company assets; (2) proceeds of a sale of such assets; or (3) bonds which he has purchased as an investment.