wages versus stock redemption
Personal Finance Forum Index Personal Finance
Talk about personal finance: tax, stocks, retirement, funds, and financial software.
Investing Blog
 
 FAQFAQ   MemberlistMemberlist     RegisterRegister 
 ProfileProfile   Log in to check your private messagesLog in to check your private messages   Log inLog in 
 
Google
 
Web pftalk.com
wages versus stock redemption

 
Post new topic   Reply to topic    Personal Finance Forum Index -> Tax Preparation
Author Message
Ted
Guest
Posted: Fri Nov 04, 2005 9:00 am    Post subject: wages versus stock redemption Reply with quote
A company in which I am an minority owner owes me severance
pay. They are proposing to redeem my stock at an above fair
price if I will forgo the severance pay. It will work out
even for me. I suppose they have their reasons.

Would this be acceptable to the IRS? I know the IRS will
claim that payments to owners are actually dividends rather
than wages; so it is hard to see them complaining about what
is essentially the opposite. And if it is not acceptable,
would they go after the company or me? Last thing in the
world I need is tax problems.

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >>

Back to top
Seth Breidbart
Guest
Posted: Wed Nov 09, 2005 9:00 am    Post subject: Re: wages versus stock redemption Reply with quote
Ted <Ted@ixmil.com> wrote:

Quote:
A company in which I am an minority owner owes me severance
pay. They are proposing to redeem my stock at an above fair
price if I will forgo the severance pay. It will work out
even for me. I suppose they have their reasons.

Would this be acceptable to the IRS? I know the IRS will
claim that payments to owners are actually dividends rather
than wages; so it is hard to see them complaining about what
is essentially the opposite. And if it is not acceptable,
would they go after the company or me? Last thing in the
world I need is tax problems.

Does it work out even for you before or after taxes? The
stock sale is capital gains (long-term?). The severance pay
would be deductible by the company.

Seth

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >>
Back to top
Steve Finn
Guest
Posted: Wed Nov 09, 2005 9:00 am    Post subject: Re: wages versus stock redemption Reply with quote
Ted" <Ted@ixmil.com> wrote:

Quote:
A company in which I am an minority owner owes me severance
pay. They are proposing to redeem my stock at an above fair
price if I will forgo the severance pay. It will work out
even for me. I suppose they have their reasons.

It seems to me it works out better for you. Long term
capital gain on the stock redemption versus ordinary income
on the severance payout. The section 302 tests seem to be
met in this case.

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >>

Back to top
Ted
Guest
Posted: Wed Nov 09, 2005 11:57 pm    Post subject: Re: wages versus stock redemption Reply with quote
"Steve Finn" <ironheadjones@verizon.net> wrote:
Quote:
Ted" <Ted@ixmil.com> wrote:

A company in which I am an minority owner owes me severance
pay. They are proposing to redeem my stock at an above fair
price if I will forgo the severance pay. It will work out
even for me. I suppose they have their reasons.

It seems to me it works out better for you. Long term
capital gain on the stock redemption versus ordinary income
on the severance payout. The section 302 tests seem to be
met in this case.

No, they propose paying me less than they would if they did
it properly, and letting the reduction in taxes make up the
difference. I googled on 302 tests and didn't come up with
much. Whats that about?

<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >>
Back to top
 
Post new topic   Reply to topic    Personal Finance Forum Index -> Tax Preparation All times are GMT
Page 1 of 1

 
 You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum

Ford dealer - Credit Repair - Bad Credit Auto Loans - Auto loans bad credit


AddThis Feed Button
New Topics Powered by phpBB