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Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1863
Experience:  Certified Public Accountant
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Children inherit stock in a corporation owned solely by a

Customer Question

Children inherit stock in a corporation owned solely by a parent. Corporation has only one asset with easily determined FMV. I assume that the FMV of the stock would be the same. The asset is sold for FMV and the corporation is dissolved and the after tax cash proceeds from the sale of the asset is distributed. Since the cash received by each shareholder is about the same as their inherited basis a double tax is avoided. Is this correct?
Submitted: 5 months ago.
Category: Tax
Expert:  Mark Taylor replied 5 months ago.

Hi, my name is Mark. I will be happy to help you with your questions. The children would receive a step up in basis on the date of death. It seems reasonable that the FMV of the stock would be based on the FMV of the asset. If the corporation sells the asset, the corporation would have a tax liability on the gain. If the corporation is dissolved at this point, you are correct that there would not be a second level of tax. The individual shareholders may have a capital gain or loss depending on the amount of proceeds that they receive.