Discussion:C - Corporation - Death of Sole Shareholder
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Discussion Forum Index --> Tax Questions --> C - Corporation - Death of Sole Shareholder
| 2 July 2007 | |
| Does anyone know what happens when the Sole Shareholder of a small C-Corp dies? This corporation owns some Mutual Funds and individual stocks worth around $200,000. For Estate Tax purposes if these securities were individually owned, the beneficiaries of the Estate would receive the stepped up basis of the stocks and mutual funds. How are they treated if they are held by the corporation at death? Thanks for the help.
T. Cross | |
| 2 July 2007 | |
| CORP and S/H are 2 entities. If the S/H dies, the beneficiaries of the estate will have ownership. Whether what they want to do with the Corporation assest is a different story. | |
| 2 July 2007 | |
| The small C corp shares get stepped up basis as of FMV on DOD. Need to get these valued.
Mutual funds and stock inside the C corp don't get stepped up basis - the corp owner is still alive. Gain or loss on the sale of these, and possibly a dividend/liquidating dividend to the new owners of the C corp (probably the 1041 of the decedent). | |
| 2 July 2007 | |
| Is the corporation profitable? What are the new owners interests? Get a valuation done to see what the FMV of the shares. | |
Corptaxhelp (talk|edits) said: | July 3, 2007 |
| If the new shareholders don't need the money immediately, I'd elect S and then wait for the BIG to go away. Otherwise, you may lose a substantial amount (a third to almost half) to the IRS on liquidation.
I'd also recommend getting a sharp financial planner involved now if the money is not immediately needed. This could be a great opportunity to plan for the next generation. Often times shares of closely-held corporations are of very low face value. You may be able to gift the shares into a trust and still stay under the taxable gifting limits. (This corporation sounds like a Personal Holding Company, by the way.) (I'd also advise against getting a professional valuation done unless you are sure you will be happy with the answer and know what you're going to do with the corporation. It's like asking for a private letter ruling -- never ask for one unless you are ready to do whatever the letter says. I'd rather have some wiggle room on the stock valuation.) | |
| 3 July 2007 | |
| The Probate court may want a guestimate of the value for the inventory list. Also, the executor may not want to pass the shares out to the beneficiaries of the will without knowing what the shares are worth for fear of treating the beneficiaries inequitably. | |
