Sale to shareholder disguised transfer to children
Article Abstract:
The IRS decided in TAM 9518002 that a sale of the decedent's shares to an unrelated shareholder was actually an indirect transfer of a remainder interest in the shares to the children of the decedents who were given the option to acquire the shares. The transfer also included shares the children got directly from the shareholder that the decedent paid for. The decedent in the case was the dominant executive of a corporation and the controlling shareholder who supposedly sold his shares to a shareholder who then gave the children of the decedent the option to purchase the aforementioned share plus additional shares. The children then exercised this option and acquired the shares. The IRS noted that the decedent never actually sold the shares to the shareholder but actually transferred them to his children.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1995
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Cross-purchase agreements retain their advantages
Article Abstract:
The purchase and sale of stock may be conducted in various ways. Under a stock redemption agreement, a shareholder's stock is bought back by the corporation. A cross-purchase agreement, on the other hand, provides that shares are to be sold to other shareholders. Redemption agreements are popular because they are simple, but they also have disadvantages that outweigh this particular benefit. It is advisable to use redemption agreements only if redemption is allowed by existing agreements and regulations and if the income tax basis of the remaining shareholders is not a major concern. Use of cross-purpose agreements is most appropriate when there are only two shareholders or when the shareholders selling stock will mind if the proceeds turn out to be income taxable.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1992
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