James is the sole proprietor of an automobile store. He wishes to pass on his assets to his children after his death. In order to attain the best tax advantage, what will his lawyer most likely advise him to do?
A) Sell the automobile store and pass the money on as cash so that he will only lose about 60 percent of it in estate taxes.
B) Sell the automobile store to the government in order to get twice the market value for it and then pass on the windfall.
C) Convert the sole proprietorship to a limited liability company and list it in his will as handed down to his heirs.
D) List the sole proprietorship in his will as passing to his heirs.

Question

Quizplus · Accepted Answer

By converting the sole proprietorship to a limited liability company, James can reduce the tax burden on his heirs. LLCs offer better tax advantages compared to sole proprietorships, and listing it in his will as handed down to his heirs will ensure a smooth transfer of assets without any legal complications. Selling the store or selling to the government could lead to capital gains taxes or other legal issues, and simply listing it in his will as passing to his heirs could result in higher estate taxes.

James Is the Sole Proprietor of an Automobile Store