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bcm2354
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Gifts from S-Corporation

Can an S-Corporation make a gift of appreciated stocks to an individual without triggering capital gains? I know if it is a distribution, that would be deemed a sale by the IRS, but could the assets be gifted and the FMV of the gifted securities flow back to the shareholder's gift tax return? In this scenario, it is a single member LLC and the gift would be made to the owner's spouse. 

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2 Replies

Gifts from S-Corporation

You've answered your own questions in the second sentence.....sole shareholder files a gift tax return for the FMV of the gift. if the gift is to your spouse the marital exclusion kicks in and no filing is needed.

Anonymous
Not applicable

Gifts from S-Corporation

Gifts to your spouse. You must file a gift
tax return if you made any gift to your
spouse of a terminable interest that does
not meet the exception described in Life
estate with power of appointment, later, or
if your spouse is not a U.S. citizen and the
total gifts you made to your spouse during
the year exceed $152,000.
You also must file a gift tax return to
make the qualified terminable interest
property (QTIP) election described under
Line 12. Election Out of QTIP Treatment of
Annuities, later.
Except as described earlier, you do not
have to file a gift tax return to report gifts to
your spouse regardless of the amount of
these gifts and regardless of whether the
gifts are present or future interests.

 

 

you may also have to check with a lawyer in your state,  there can be issues if a corp (s or otherwise) issues stock without adequate consideration. (from a legal standpoint - loss of limited liability to some extent)   it is possible that the IRS could come in and say the gift was really compensation for services performed or some other tax theory that could end up costing you big $$$$      

 

since the wife under no conditions will receive a step-up in basis, far simpler would be for the owner to gift some of the shares he owns to his wife.      should accomplish the same thing without the possibility of tax issues down the road.

 

talk to a lawyer so you can discuss what your trying to achieve and the best way to do it, if at all possible

 

we're also assuming the wife is eligible to hold S-corp stock.  

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