Discussion:Another question on gift of stock
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Discussion Forum Index --> Tax Questions --> Another question on gift of stock
| 12 January 2007 | |
| I am trying to prepare the 1120-S for my client who in 2005 was 90% s/h of an s-corp with his father owning 10%. Easy enough.... In 2006, the father gifted to his son a personal residence that was rental property in 2005 and before. The FMV of the property was about 150K. The son paid 1.00 for the property and the parents will take their annual gift tax exclusions on the gift up to the allowable amount but still need to file the tax return and I assume pay gift taxes on the gift above the excluded amount.
The father also on 1/1/2006 gifted to his son his 10% interest in the corporation. An appraisal is necessary I have been advised, so who knows what will be the FMV of this.... My question: FYE 2005, I prepared (2) K-1's for ownership percentages. I did NOT mark the father's as a final K-1 as this came about in 2006. On the corporate return, do I just change the percentage of ownership to 100% for the son and let IRS get the gift tax information to justify the 10% s/h status of the stock in prior years? Dad has too much time on his hands I think :) | |
| January 12, 2007 | |
| Sandy - If the ownership change was in 2006, I would file a K-1 for the father with the 2006 S Corp return, change the ownership % to 0 and mark his K-1 as final. There should be no amount entries on the father's K-1. I just tested this in my software, and it changed the number of shareholders at year-end to 1, after I marked one of the shareholder's K-1 to Final and changed the %s to 100 and 0. | |
| 12 January 2007 | |
| Do you use ProSeries Deb? The change was retroactive to 1/1/06.... | |
| January 12, 2007 | |
| Yes, ProSeries Pro. I'm just thinking this would be the way you tell the IRS that the father is no longer a shareholder, since his K-1 was not marked as final on the 05 return. | |
| 12 January 2007 | |
| No gift tax is paid until accumulated lifetime taxable gifts exceed $1 million. If client's father is married you can elect to have half of the gifts attributed to spouse. | |
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