Question

Explain the requirements for a redemption to pay death taxes. What are the tax consequences of a redemption to pay death taxes for the shareholder and the corporation

Answer 1

Answer:

1. The requirements for redemption to pay death taxes are as follows:

- A shareholder must die.

- Value of stock of 1 corporation must exceed 35% value of adjusted gross estate.

- Stock of 2 or more companies exceeds 35%of adjusted gross estate if interest in both companies was greater than 20%.

- Redemption limited to sum of death taxes, funeral expenses and estate legal costs.

- Stock attribution rules do not apply.

2. The shareholders has no tax consequences as he has died. he heir to the shareholders have little or no tax consequences as the redeemed shares hold a fair market value on the date of death.