In Year 1 there is one owner of 500 shares in S-Corp with value of $50,000.
In Year 2 the 1st owner gives 100 shares each to 4 children resulting in 5 owners of S-corp with a value of $100,000
In Year 3 1st owner dies and 100 shares are given 25 each to children, Value of S-Corp is $200,000 at this time.
In Year 4 S-corp sells all assets for $1,000,000 for a gain within the S-Corp of $950,000. What is the basis for capital gains to the 4 children? One-fourth of the S-Corp gain ($237,500) or is it based on the value of their 125 shares which are now worth $30,000. Is their gain $237,500 - $30,000 (Share Cost) or $207,500?
Advantage is avoiding capital gains tax on the $237,500 vs only $207,500.
2007-02-22
09:55:55
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2 answers
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asked by
Joe Ski
2
in
United States