Question

When an individual dies, their tax obligations are passed on through the estate. Also if the estate is to expensive a tax might be owed. Lets say I owned a business worth $100 million dollars and I have 25% stake in the company.

Lets say 100% of the what I own in the company will be taxable and I am married and it will be filed jointly.

Company's net income is $17.5 million.

If I was selling the company how much estate tax attributable would I be facing filing jointly?

Also any tax laws that you reccomend to ensure that what ever is owed is reduced?

Answer 1

When an individual die the tax obligations gets passed on in the name of beneficiary, however a property can be transferred only if you have a substantial proof to claim.

A person holding substantial interest in a company and if the company was sold then if the shareholder agrees to get the shares allotted, after purchasing the company by the purchasing company then there will be no tax implications and if the shareholder subsequently sells the shares then the cost of acqusition of such shares shall be the original cost of acquisition of shares before sale of the company in the sold company.

On the other side if the shareholder doesn't agree to get the shares allotted then capital gains tax would arise in the hands of shareholder.

However if the company agrees to distribute the entire net income to its shareholders then a person owning 25% share in a company gets taxed with the amount equal to 25% income distributed to its shareholders.

In this case the amount is $4.375 Million.

If your spouse is also having the substantial interest in the company then the income so received shall be taxed in the hands of the person who is having higher share in the company.

If the spouse is not having substantial share in the company then it shall taxable in the hands of the owner of the substantial interest.