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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 14059
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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This question is about corporate tax law and transfer of stock/shares.

Resolved Question:

This question is about corporate tax law and transfer of stock/shares. One of my business partners wants to give me half of his ownership in a corporation (as per an agreement we had). He is currently listed as the owner on the stock. I recently setup an LLC to serve as a holding company for these shares with both of us owning 50% of the LLC. Is there a tax liability on his behalf or on my behalf to have the ownership of those shares transferred to our LLC?
Submitted: 11 months ago.
Category: Finance
Expert:  Megan C replied 11 months ago.

Megan C :

Thank you for your question, and thanks for using JustAnswer.com

Megan C :

If you are given these shares with no consideration, then it is considered a gift

Megan C :

You are not taxed on the receipt of gifts,

Megan C :

and the person giving the gift is not taxed, unless they have already given away over $5.2 million during their life.

Megan C :

However, they would need to file a gift tax return if the value of the shares was greater than $14,000

Megan C :

Also, transferring an asset into an LLC does not trigger tax, either

Customer: Ok so does transferring the assets to an LLC not trigger the gift issue, so in other words does it bypass the need to file that gift return?
Megan C :

If you are putting shares into your own LLC, there is no tax or gift tax issue

Customer: He would be putting shares into an LLC that I formed and he owns 50% of
Customer: So would that bypass it?
Megan C :

He's still gifted you half the shares

Customer: Right but not directly
Customer: So he would still need to file the form your saying
Megan C :

Yes, but it's still a gift

Megan C :

yEs

Customer: Ok and the $5.2 million is a lifetime number? And is that the par value of the shares?
Megan C :

The $5.2 million is the amount of gifts you can give in a lifetime. I don't know what the par value of the shares would be - that would be in the incorporation documents

Customer: Oh okay, but it is based on the par value correct?
Megan C :

It's based on the fair market value - par value is just arbitrary

Customer: Ah alright thanks for your help I really appreciate it, do you know the form number for the gift?
Megan C :

Yes, it's 709

Megan C :

Is there anything else that I can assist you with today? If not, please rate as "excellent" so that I may receive credit for assisting you today

Customer: Nope and most certainly I will
Megan C :

Thanks so much!

Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 14059
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and 5 other Finance Specialists are ready to help you
Expert:  Megan C replied 11 months ago.
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