Tax Law (Questions About Taxes)/Equity Gift


QUESTION: I have a contracting client with a c corporation. The corporation built a home for the client's son who is an employee.
At closing, the title company used a gift equity from seller of $39,000. There has to be a tax consequence somewhere. How do I handle the gift equity?

ANSWER: It is a distribution from c corp to shareholder (dividend) and then shareholder made tax free gift to chd, but because it (gift) is over gift reporting threshold, gift tax return (but no tax) is also due.  If shareholder and son are married, dad and mom can elect gift splitting and make 4 separate gifts under the threshold and no return is due (dad to son, dad to daughter in law, mom to son, mom to daughter in law) obviates need for gift return

Big key is dividend to shareholder

Even more important, is why on earth is close corp a c corp?   That is the intriguing question!!!

---------- FOLLOW-UP ----------

QUESTION: After searching through IRS material, they maintain that because of the employer/employee relationship, the $39,000 has to be included in the employee's income. What you are saying is the shareholder is taxed. Which is correct?

it really depends who the control is...

you said contracting corp - assumes that dad is also involved?  who owns the corporation?

if the son is purely an unrelated party but an employee, why did you even call him son.  ? where does dad fit into the equation?

if just son as an employee and family has no other control or activity in the business, then yes - I would think w2 wages to son for the 39k .  but then it is just wages to employee not son.

what is the scoop.  who owns what?  

Tax Law (Questions About Taxes)

All Answers

Answers by Expert:

Ask Experts




Tax and general business including hospitality related (hotel mgmt degree and experience in industry prior to obtaining ms tax and cpa).


19 years cpa. ms tax. NOTE: My discussions are only a general information and do not constitute tax advise without entering into a specific agreement and executing an engagement letter; This free chat is nothing more than general information and should not be construed as tax advice nor does my response or replies imply an agreement to provide client specific advice or other guidance for purposes of avoiding IRS tax or penalties and should not be relied upon without your own validation and confirmation of the how the discussion may fit your facts... Not having all the facts and/or not having a direct client relationship prevents me from providing the most accurate replies as possible and I highly suggest using a local CPA to provide you with written advice and guidance. Taking matters into your own hands is much akin to trying to land an airplane without a license. It is easy to FLY a plane, but LANDING is when critical experience is key. In short, caveat emptor; do your homework and don't just rely on free chat board advice anywhere, anytime.

AICPA, CSCPA (Ct society), National Tax,

a bunch.

MS tax and other post graduate coursework

Awards and Honors
variety including Summa Cum Laude

Past/Present Clients
I don't disclose or kiss and tell

©2016 All rights reserved.