Discussion:S Corp basis of gifted stock
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Discussion Forum Index --> Advanced Tax Questions --> S Corp basis of gifted stock
Discussion Forum Index --> Tax Questions --> S Corp basis of gifted stock
| 2 July 2008 | |
| Parent gifts 40% of stock to son. At date of gift, common stock is $1,000 and AAA is 99,000. Does son have immediate basis of $40,000? Is parent basis now only $60,000? Son has withdrawn $$ in excess of current earnings. | |
| 2 July 2008 | |
| Do you have the parent's S corp basis worksheets? The answer is there. | |
| 2 July 2008 | |
| as for the unstated 2nd question, the tax consequences will depend on the son's basis worksheet. What does it show? | |
| 2 July 2008 | |
| Kevinh5, are you a politician? You seem incapable of answering a question.
Once I get an answer to the questions I posed, I can complete the S corp basis worksheets. | |
| July 2, 2008 | |
| Politically, he's intimating that your answers aren't necessarily on the financial statements. Rather, on the basis worksheets for mom and dad's ownership. And yes, his gift/basis would transfer from off that. | |
| 2 July 2008 | |
| Would we also need to consider the FMV value of the stock? It is possible that the FMV could be less than the parents basis. Or is that only for determining a loss if the son sells? | |
| 2 July 2008 | |
| Then the answers to my questions are:
Yes the son has basis of $40,000; and Yes parent's basis is $60,000. The answer to the unstated 2nd question is No, the son does not have distributions in excess of basis. FMV was used to value the gift on Form 709 | |
| 3 July 2008 | |
| sorry Rls, you are wrong. You need the parent's S Corp Basis worksheet before you can determine the son's. I highly doubt that the answer will be exactly $40,000 and $60,000 unless parents gave stock immediately after incorporating before S corp began operations.
I'm not incapable of answering a question, I just am pointing out the source of the answer is not with us, it is with you (or the parent's accountant). | |
| 3 July 2008 | |
| Obviously you know that your guess might have been wrong, otherwise you wouldn't have posted the question. Just to show you that I mean to be helpful I'll let you know that at least twice in the last year I've posted a link to an S Corp stock basis worksheet. The yellow search box to the upper left is your best friend. Well, at least here at Tax Almanac. | |
| 14 July 2008 | |
| Parent's S Corp basis in 100% of the stock (per the worksheet) prior to the gift is $100,000, which is the same number as common stock ($1,000) plus AAA ($99,000) as listed in my original question.
With that information, am I still wrong or have the rules on basis obtained by gift changed? | |
| 14 July 2008 | |
| What date is the worksheet based on? what day of the year did the gift occur? if not 12/31 or 1/1, do you think you have to take into consideration any intervening transactions by the corp? How about distributions since the end of the prior year? | |
| 14 July 2008 | |
| Worksheet date - 12-31-06.
Gift date - 1-1-07. No business tracsacted on January 1, 2007 since that is a national holiday. No distributions on January 1, 2007. Why are you trying to make this simple question so complicated? By the way, the $99,000 AAA figure is not actual, but it makes the math easier. | |
| 14 July 2008 | |
| if it were so simple why would you have to ask a question?
how were we to know that the gift was done on 1/1 without my asking? The probability was 363/365 that it wasn't done on 12/31 or 1/1. Based on your recent answers, I believe that you have the correct solution (assuming FMV at time of gift is at least equal to basis). But it is not based on your reaasoning. In other words, basis doesn't always have to equal AAA plus capital stock. | |
