401(k) plan


A deferred compensation retirement plan in which an employer withholds a portion of an employee's pretax wages and invests them in a qualified plan; an employer may contribute to an employee's 401(k) plan, e.g. by matching an employee's contributions. Wages invested in a 401(k) plan and income earned therefrom are not taxed until the employee withdraws them from the plan.




Qualified intermediary


In a 1031 exchange, a person who acquires business or investment property from a taxpayer, sells that property, uses the proceeds therefrom to acquire like-kind business or investment property for the taxpayer, and then transfers the like-kind property to the taxpayer. A taxpayer who uses a qualified intermediary to conduct a 1031 exchange can defer payment of capital gains tax on the sale of his or her property.


marital deduction


If a married couple has a community property estate of $500,000, each has a net estate value of $250,000. Assuming both spouses have wills that leave their estates to each other, when one spouse dies, the other will inherit the decedent's $250,000 estate. That inheritance is free of estate tax, because the marital deduction eliminates estate tax on anything from one spouse to the other.

Example provided by Paul Premack Esq.



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