Mr. and Mrs. Green would like to transfer their family business to their son. However, their son does not have the required funds to purchase the company at this time. Which of the following might Mr. and Mrs. Green consider in order to make the transfer possible without any immediate tax consequences?

Question

Quizplus · Accepted Answer

By reorganizing their shares, Mr. and Mrs. Green can exchange their common shares for preferred shares of equal value without any immediate tax consequences. They can then issue a new class of common shares to their son for a nominal value, which would allow him to take ownership of the business without having to come up with a large sum of money. Selling their shares to their son or to a third party, as well as selling the appreciated assets in the corporation, would likely result in immediate tax consequences.

Mr and Mrs