Tax Planning for Business Succession and Stock Purchase Agreements

by Tax Facts Online | Mar 20, 2017   ()

Normally, no taxable gain will result to a deceased’s estate if stock is sold to surviving individual shareholders at its full market value under a standard buy-sell agreement. At the stockholder’s death, the stockholder’s stock receives a new tax basis equal to its fair market value at the time of death.   Because the sale price under a properly designed buy-sell agreement usually is accepted as the fair market value of the stock, the basis and sale price normally will be the same. Consequently, there should be no capital gain. Since individuals, rather than the corporation, purchase the stock, the payment cannot be regarded as a dividend However, if the parties to the buy-sell agreement are related, additional caution should be taken to determine that the sale price under the buy-sell agreement is reasonable.

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Source: Think Advisor
Source: Think Advisor

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