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CGCPA, CPA
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Dear,I have 60% of a small private company Im 65 , can I

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Dear, I have 60% of a small private company I'm 65 , can I transfer my share to my 5 kids, overs 18 year old, as basic which is zero ? This is a family business and small family company. I think if I can transfer as cost to my kids then the original value was zero and then there is no capital gain.

 

 

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.

 

Unfortunately, while that sounds like a great idea, it will not fly. It is not the original basis but the basis at the date of gift which counts. Therefore, you will need to determine the prevent basis in the business before making the gift(s).Additionally, the gift to your children would not create a capital gain but could create a gift tax concern. You also should get the agreement of the 40% owner before making any transfers (the partnership agreement may spell the process out in your case).

 

Nevertheless, there is a light at the end of this and it can avoid gift taxes.You can make a gift of up to $13,000 to each of your children each calendar year without creating the need to file a gift tax return. If you are married, you can give 1/2 the business ownership to your spouse and he/she can also do the $13,000 per person tax free gifting. Thus, with 5 children, you can gift $65,000 this year and every year after. Your spouse can do likewise and the transfer between you and your spouse is also tax free.

 

At the other end of the spectrum if the gifts exceed the $13,000 per person per year limit you will need to file a gift tax return. If the gifts exceed a total of $5,000,000 (yes million) you may even have to pay a gift tax. Below that level there will be no gift tax imposed (unless the laws change again).

CGCPA and 2 other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Im canadian. Do i qualify that gift tax in us?

The fact that you are a Canadian will not adversely effect your gift made in the US. Although I am not an expert in Canadian tax law, the gift will not be subject to US tax. US tax law imposes gift tax on the giver not the recipient. You will need to check Canadian tax law about any Canadian gift tax responsibilities.

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