Income tax considerations of buy-sell agreements

Article Abstract:

Buy-sell agreements are useful vehicles for limiting the group of shareholders and allowing shareholders to liquidate their investments. Agreements typically have a redemption, a repurchase of shares by the corporation, or a cross-purchase, the purchase of shares from a shareholder by other shareholders. These provisions are triggered by specific events, such as the retirement or death of a shareholder. The income tax consequences of a redemption depend on whether the distribution is characterized as a payment for the stock or a Section 301 distribution. The profit is treated as a gain if the exchange satisfies certain tests. A cross purchase may prove to have more advantageous tax consequences than a redemption. Since most shareholders prefer redemptions, a solution is to draft a document that makes the agreement flexible, granting the company one option and the shareholders another option.

Laws, regulations and rules, Income tax, Buy-sell agreements

---

Traditional tax considerations in sale of a business no longer valid

Article Abstract:

Shareholders have three choices when selling a business: a corporate sale of assets; a sale of stock by shareholders; or a nontaxable reorganization in which the corporation exchanges assets for stock in another corporation. Closely held businesses should contemplate an asset or stock sale since tax-free reorganizations typically are not a viable option for owners of closely held businesses desiring cash or liquid investments for non-liquid business interests. Stock sales are the easiest venue for disposing of a business and avoids double tax to the seller, but most closely-held businesses are sold through an asset sale. Asset sales expose the selling shareholders to two levels of tax: the gain from the asset sale is subject to corporate level tax, and the distribution to liquidate corporate assets after a sale typically gives rise to a taxable loss or gain to the shareholder.

Close corporations, Closely held corporations, Business sale

---

Planning for retireds and those approaching retirement involves special considerations

Article Abstract:

An important source of revenue for many accountants is the business generated by tax planning for the aged. Services cover alternatives for retirement income, pre-retirement accumulation plans, shifting of income, and business, gift, and estate programs. Income sources usually associated with retirement include profit sharing plans, Social Security payments, annuities, and pensions.

Accounting and auditing, Retirement income, Retirement

Similar abstracts:

• Abstracts: Wider still and wider: the international expansion of the accounting profession
• Abstracts: Accounting for the effects of changing prices. Accounting for pensions costs: transitional provisions
• Abstracts: The accountant - bean counter or business expert? Breaking the financial code

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.