Pub. 3 Issue 4

11 SPRING 2016 Q: Only one of my children is involved in the dealership. I want to make sure that she receives my interest in the dealership but I don’t have enough cash to equalize gifts to my other children. A: One possible solution is for you to sell a portion of your interest in the dealership to the child involved in the business in exchange for a promissory note. After your death, your family trust could distribute the remaining interest in the dealership to the child involved in the business anddistribute the promissorynote in equal shares to the remaining children. This method ensures that the child involved in the business receives the entire dealership while the remaining children receive a valuable, income-producing asset of equal value. Q: I’m not sure whether the manufacturer will allow me to transfer interests in the dealership to my children. A: Each manufacturer has its own criteria for determining whether to allow a dealer to transfer ownership of the dealership. While California law prohibits a manufacturer from denying the widow, widower or heirs designated by a deceased owner the opportunity to participate in the ownership of the dealership for a reasonable time after the death of an owner, working with the manufacturer now to iron out the proposed ownership transfer provides needed certainty. Transferring interests in the entity owning the real property on which the dealership is located is another way to transfer value without running afoul of manufacturer rules. If the same entity owns both the dealership and the real property, depending on the type of entity, it may be possible to separate the dealership and the land into separate entities without causing significant, adverse income tax consequences. While there is no one “correct solution” for all dealership succession plans, starting the process now allows you to choose your successor, provides your successor the time necessary to grow in and develop the business and, ultimately, saves money for your family. Benjamin Franklin stated, “An ounce of prevention is worth a pound of cure.” With forethought, you can ensure that your successors inherit a valuable and growing dealership without the complications associated with leaving your business succession plan undone.  Blaine M. Searle, Esq. focuses his practice on business law, tax law and estate planning. He received his J.D. from the University of Oregon, 2003, and his LL.M. in Tax Law from Georgetown University Law Center, 2004. You may contact him for assistance at bsearle@ferruzzo.com, 949.608.6900. Ferruzzo & Ferruzzo, LLP has over thirty-five years of experience advising clients, including numerous car dealers, on multiple areas of law including business transactions, employment matters, litigation, real estate transactions, estate planning and tax law. 1 http://bit.ly/1T8YcmP. 2 In either event, the process of transferring the assets to the ultimate recipients, called probate, is long and expensive. Our easy-to-use software helps dealers manage their entire courtesy car business, from the customers to the loaner fleet to manufacturer reporting. The Global Value Leader in Loaner Fleet Management Software World Headquarters: 200 Mineral Springs Drive, Dover, NJ 07801 USA • 973.989.2423 • 800.304.5805 • sales@barsnet.com www.barsnet.com How are you managing your courtesy car business today? Interfaces with your Dealership Management System (CDK, Reynolds, DealerTrack, Auto/Mate), sharing customer information and saving hours of data entry. Over 125 reports give you instant data on your operation, including Reservations, Scheduled Maintenance, Fleet Utilization, and much more. Log reports display Customer, Courtesy Vehicle, Odometer Out and In, and Service Repair Order. Laser-printed Loaner Agreements feature all current legal Terms and Conditions. Provides audit trails for each loaner with the ability to bill to multiple entities, including warranty, body shop, insurance and customer. Bluebird’s Cloud-based software is cost-effective for loaner fleets as small as 5-10 vehicles. Not as well as you’d like? Then you need...