Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 01-24-2015, 12:22 PM
Junior Member
 
Join Date: Jan 2015
Posts: 2
trading shares between multiple s corps

I am a minority owner in 4 different, closely held (by family) S corps. All 4 are located in Wyoming. I am considering trading my shares in 3 of the S corps for a majority interest in the 4th business. I realize we would pay capital gains if we sold the shares to each other. do we pay capital gains if we trade shares in this way? How does this work?
TJ



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 01-24-2015, 07:36 PM
Moderator
 
Join Date: Oct 2010
Posts: 5,236
Quote:
Originally Posted by garfieldave View Post
I am a minority owner in 4 different, closely held (by family) S corps. All 4 are located in Wyoming. I am considering trading my shares in 3 of the S corps for a majority interest in the 4th business. I realize we would pay capital gains if we sold the shares to each other. do we pay capital gains if we trade shares in this way? How does this work?
TJ
There are two ways that a S corp shareholder can dispose of his stock in the company: sell it to another person or sell it back to the company. The latter transaction, known as a stock redemption for tax purposes, is often the more common method of disposition in the S corporation context. This section considers a redemption to be either a “sale or exchange” or a “distribution,” and, depending on the form applied to the transaction, it will have different tax consequences to the taxpayer as well as the company. for a redemption to be treated as a “sale or exchange,” the transaction must; the transaction must result in a complete redemption of all of the S corporation stock owned by the selling shareholder;immediately after the redemption, the selling shareholder must own less than 50% of the total voting power of the company and the percentage of the company’s voting stock owned by the selling shareholder immediately after the redemption must be less than 80% of the company’s total voting stock owned by the shareholder immediately prior to the redemption ;the redemption is not essentially equivalent to a dividend. a minority shareholder whose relative interest in the company is minimal i.e., less than 1% and who exercises no control with respect to the corporate affairs would generally be considered to have a meaningful reduction upon his sale of some of his shares back to the company. The redemption would, therefore, be treated as a “sale or exchange,” and you would realize a capital gain in the transaction



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Tennessee excise and hall income tax for S Corps baskets S-Corporation 1 12-04-2014 07:59 AM
trading Income in S-Corp. spkb69 S-Corporation 6 12-23-2011 01:20 PM
Deadlines Near for Business to Choose Expanded NOL Election; Sept. 15 for Many Corps Samatg General 0 09-11-2009 11:56 PM
tax on foreign listed shares muchha Capital Gains 1 07-13-2008 11:55 AM
tax ramifications of trading-in joseph Auto Expenses 0 12-16-2007 01:55 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning