Fifty percent of the capital gain on qualified small business stock is exempt. Valuation discounts can be obtained for some assets in an estate. And that s just part of the story. There are a great many opportunities for short and long term deferral of taxes by deferring income. A few examples include tax deferred exchanges, tax deferred annuities, income received by tax qualified savings plans, appreciation on the value of assets, interest accumulations on U.S. EE bonds, earned income in tax qualified and non-qualified deferred compensation plans and gains on a residence that are reinvested.
Many taxpayers grossly underestimate the real value of tax deferral.
When the deferred income can be invested to make more income, the extra earnings can exceed the taxes after a number of years. Thus, tax deferral can have the same result at tax exempt income if the deferral results in earning income on the deferred taxes. Sometimes this is done to transfer assets and income to dependents or to parents. Transferring income producing assets to children or parents can also help to save future estate taxes. Sometimes it involves the use of a taxable corporation or a trust.