CFP

By Investopedia AAA

Postmortem Estate Planning Techniques - Corporate Stock Redemption

Corporate Stock Redemption
If a decedent and their family own more than 50% of a corporation, there are some complex rules which might treat the redemption of stock as a dividend. Under Section 303 of the tax code, there is an exemption to the dividend treatment even if the deceased owned 100% of the stock. The amount paid to the heirs or estate of the decedent can be treated as a sale or exchange instead of dividend treatment.

To qualify for this favorable tax treatment, the deceased must have corporate stock making up 35% or more of their adjusted gross estate.

This special treatment is most suitable for families where a corporation represents a major asset of the family, and where the surviving shareholders want to continue to operate the business. In many cases, the redemption may be part of a buy/sell agreement between shareholders of a closely held corporation or a family owned corporation. Special Use Valuation

You May Also Like

Related Articles
  1. Several things factor into the salary of a financial advisor. Here's a look.
    Investing Basics

    How Much Does A Financial Advisor Earn?

  2. With a long list of risks, losses associated with foreign exchange trading may be greater than initially expected. Here are the top 5 forex risks to avoid.
    Economics

    Top 5 Forex Risks Traders Should Consider

  3. ISAs are financial instruments that allow students to raise funds to pay for their degrees by selling shares in their future earnings.
    Investing Basics

    Funding Higher Education With An ISA

  4. Top Ways to protect your purchases from credit card hackers or security breaches.
    Credit & Loans

    7 Ways To Protect Against Credit Card ...

  5. The Internal Revenue Service's new 2015 contribution limits for tax-deferred savings plans are higher; here's what you and your clients should know.
    Investing Basics

    New 2015 Contribution Limits: Advisors ...

Trading Center