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A client is a 100% owner of a C corp. He wants to make arrangements

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A client is a 100% owner of a C corp. He wants to make arrangements for it to go to his 8 children upon his death. What steps does he need to take. Is this something as simple as having it indicated in his will the a certain amount of stock go to each child? Are there any tax consequences?
Submitted: 4 years ago.
Category: Tax
Expert:  CGCPA replied 4 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

Depending on the net worth of the client, the distribution to his children at his death may be subject to the estate tax. A net worth of over $5,000,000 is subject to the tax at this time. However, the rules do change so you will need to keep an eye on that.

Here is a short piece from the IRS about the estate tax. The rates can, at higher estate values, be monstrous. You should consider preparing a draft return now so you can review it with your client while he is still able to properly consider his options. Once that is done let me know a bit more and I will help you establish a game plan to minimize the tax bite. The article from IRS has links to other documents you should consider.

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Estate Tax

The Estate Tax is a tax on your right to transfer property at your death. It
consists of an accounting of everything you own or have certain interests in at
the date of death (Refer to Form 706 (PDF)).
The fair market value of these items is used, not necessarily what you paid for
them or what their values were when you acquired them. The total of all of these
items is your "Gross Estate." The includible property may consist of cash and
securities, real estate, insurance, trusts, annuities, business interests and
other assets.

Once you have accounted for the Gross Estate, certain deductions (and in
special circumstances, reductions to value) are allowed in arriving at your
"Taxable Estate." These deductions may include mortgages and other debts, estate
administration expenses, property that passes to surviving spouses and qualified
charities. The value of some operating business interests or farms may be
reduced for estates that qualify.

After the net amount is computed, the value of lifetime taxable gifts
(beginning with gifts made in 1977) is added to this number and the tax is
computed. The tax is then reduced by the available unified credit.

Most relatively simple estates (cash, publicly traded securities, small
amounts of other easily valued assets, and no special deductions or elections,
or jointly held property) do not require the filing of an estate tax return. A
filing is required for estates with combined gross assets and prior taxable
gifts exceeding $1,500,000 in 2004 - 2005; $2,000,000 in 2006 - 2008; $3,500,000
for decedents dying in 2009; and $5,000,000 or more for decedent's dying in 2010
or later (note: there are special rules for decedents dying in 2010.)

For additional information, refer to Instructions for Form

References/Related Topics
Customer: replied 4 years ago.
The business owns a restaurant that is leased out and operated by someone else. The annual income is about 36,000. The fixed assets are 180,000 (with depreciation of 120,000) and I would guess the property is worth about 400,000 if it were to be sold.

This is will below the criteria for estate tax.

There are 50,000 shares of stock with a par value of $1.00. Would the shares go to the children at the same basis?
Expert:  CGCPA replied 4 years ago.
The tax will, assuming all remains constant, be zero and a filing will not be required. The shares will transfer to the children at the book value at the date of your client's death. However, please remember that the estate tax includes all the taxpayers assets net of obligations rather than just the restaurant. It sounds like there will be no problem.
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