Kit and Skye Berzina would like to transfer their family business to their child, Winter.Winter does not have the required funds to purchase the company at this time.Which of the following might Kit and Skye consider in order to make the transfer possible without any immediate tax consequences?
A)Sell their shares to Winter.
B)Sell their shares to a third party who will then hire Winter.
C)Reorganize their shares, exchanging their common shares for preferred shares of equal value, and then issue a new class of common shares to Winter for a nominal value.
D)Sell the assets in the corporation that have appreciated in value.

Question

Quizplus · Accepted Answer

Reorganizing their shares by exchanging common shares for preferred shares and issuing a new class of common shares to Winter for a nominal value would allow the transfer of the business to their child without any immediate tax consequences. Selling shares to Winter or a third party would result in a taxable capital gain for Kit and Skye, while selling appreciated assets would trigger a taxable capital gain for the corporation.

Kit and Skye Berzina Would Like to Transfer Their Family