Capital Gains and Losses

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Taxpayer is shareholder in S Corp. Stock basis is $0, debt…

Taxpayer is shareholder in S...
Taxpayer is shareholder in S Corp. Stock basis is $0, debt basis is $0. S Corp buys back all of the shareholders 255 shares in exchange for, according to the redemption agreement:1. $25,000 in 2017;
2. A promissory note for $90,000 to be distributed over 9 years; and
3. Additional Consideration. As additional consideration for the Shares, ABC Corp shall assign, transfer and convey to Seller, free and clear of all loans, liens, claims, and encumbrances, the life insurance policy PBC presently owns on Seller's life, the value of which is agreed to be $8,000 (the "Life Insurance Policy").The life insurance policy is a “Whole Life” policy with Total Current Base Policy Face Amount $500,000.00 and a Total Cash Value of $2,124 at the time of transfer.What is the taxpayer’s reporting requirement for the transfer of life insurance policy and does he have a taxable gain?
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3/15/2018
Stephen G.
Stephen G., Financial Advisor
Category: Capital Gains and Losses
Satisfied Customers: 7,469
Experience: Senior Tax Expert; CPA/PFS(retired)Personal Financial Planner; Small Business & Professional Mergers & Acquisitions
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If there is an "agreed value" of the policy of $8,000., as part of the redemption of the 255 S-Corp Shares, that would be the value I would use when determining the gain to Seller of the sale of his 255 S-Corp stock.

I presume "PBC" is a typo and it should be "ABC". If that's not the case, who is PBC?

Steve G.

Stephen G.
Stephen G., Financial Advisor
Category: Capital Gains and Losses
Satisfied Customers: 7,469
Experience: Senior Tax Expert; CPA/PFS(retired)Personal Financial Planner; Small Business & Professional Mergers & Acquisitions
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Customer reply replied 4 months ago
Hi Stephen - PBC is ABC. This seems to make sense, since it was part of the sale of the shares. Thanks for the quick reply.

Please remember to rate my response as that is the only way the SITE

will credit me for assisting you today.

Thanks very much,

Steve G.

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