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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4475
Experience:  35 years tax experience, including four years at a Big 4 firm.
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The owner of my company wants to make me a partner. It is

Customer Question

The owner of my company wants to make me a partner. It is not public so there is no stock involved. He has valued the company at 1 million dollars. He states that if he makes me a 25% partner that I would have to pay taxes on $250,000 of he does not charge me for it. Is that true or would I just pay taxes on my portion of the profit?
Submitted: 11 months ago.
Category: Tax
Expert:  PDtax replied 11 months ago.

That isn't true. I'mCustomer

The transfer of equity in a partnership is generally not taxable, it is purchased. By your working for less, for your commitment to stay on, etc.

There is more to the taxability question, but with the limited facts presented, you might have no tax due. Only when you sell the shares.

To do an in-depth review would be time consuming and more expensive than this question price. But for now, no tax.

Thanks for asking at just answer. Positive feedback is appreciated. I'mCustomer

Customer: replied 11 months ago.
I have been advised by my employer's tax consultant that the information provided is incorrect. I am requesting a refund.
Expert:  PDtax replied 11 months ago.

You did not provide enough information to determine taxability.

Most professional partnerships are purchased, with equity commitments, assumption of debts, a contract for services, termination, covenant not to compete, and other factors. You mentioned none.

If the interest in a partnership worth $250,000 is being transferred to you without consideration, that's very possibly taxable. Not enough information was provided.

i stand by my response. I said "but with the limited facts presented, you might have no tax due. " It very possible it could be taxable.

Since the advisor you consulted likely had more information on the transfer, and advised it was indeed taxable, then I tend to agree. You just didn't provide enough information.

I will advise site management to close out your request.