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Do I pay taxes on receiving and selling Class B shares?

I work for a small private company with three employees. The owner is selling half of the business to someone. In the contract of that sale, I will be given about $12,000 worth of Class B shares. Do I pay taxes for the receipt of those shares if I sell them back to the company?

Stocks, Taxes
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November 2017

The short answer to your questions is yes, but the timing and at which tax rates can be controlled. The level of control depends on how you will receive the stock (part of your compensation vs gift) and how long you hold the stock.  If you would like to read up more on the area specifically look into Incentive Stock Options (ISO's), Non-qualified Stock Options (NQSO's), and Restricted Stock Units (RSU's).  Based on timing and method of acquisition it, is possible to a degree to control how much is recognized as Ordinary Income and how much is recognized as a Capital Gain.  This presents a wonderful planning opportunity and I would recommend finding someone, either locally or virtually and preferably a CFP®, who can sit down with you on this to cover all the moving parts.  If the owner is willing to work with you on how the shares are transferred to you, there is tremendous potential to increase your benefit from the sale.  It depends isn't the best answer but having someone who knows the specific details of your financial situation is really the best way to get useful advice when dealing with something like Small Business Stocks.  They can be tricky to some degree and it's always better to plan ahead of such a transaction as opposed to afterwards whenever possible.  I hope this helps.


Antowoine Winters, CFP®

Next Steps Financial Planning, LLC