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Essay / Research Paper Abstract
This 6 page paper looks at the rule that allows for redemption of stock after the death of a corporation owner. Advantages of the tax code are explored. Bibliography lists 5 sources.
Page Count:
6 pages (~225 words per page)
File: RT13_SA210303.rtf
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Unformatted sample text from the term paper:
liabilities and they also provide other benefits. One tax problem that crops up when someone dies is taxation on the estate itself and also, funeral expenses can be costly. A
provision in the IRS code allows for the tax free withdrawal of funds utilized for expenses related to the deceased, and this is referred to as IRC 303. Gelband
(1992) explains that taxation of withdrawals from family-owned businesses may be handled in a variety of ways and much is dependent upon the amount of money that is withdrawn as
well as the value of the business, some of which is contingent on interpretations of Section 303 of the tax code. In fact, the Internal Revenue Code Section 303
which pertains to distributions and redemption of stock to pay death taxes, is quite applicable in some situations. It is related to what happens after the death of an individual
who holds a corporation. Section 303 lets a corporation buy stock from the estate in order to pay death taxes, funeral expenses, as well as the cost of
estate administration and all of this is income tax free ("Stock Redemption," 2002). A stock under some circumstances, may be eligible for a Section 303 redemption, but it must
be included in the gross estate for estate tax purposes (2002). The value of the stock must comprise an amount that is equivalent to more than 35% of ones
"adjusted gross estate" (2002). The corporation is also required to redeem the stock from the corporate surplus, and the redemption has to occur within a four year period after the
death (2002). In other words, the Section 303 redemption is designed for families who have corporations where the death of a primary in the corporation would necessitate expenses. Although it
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