THE TAX PROPHET: Frequently Asked Questions:  September 2003 -- Print Version

Q:  I work for a closely-held corporation that wants to pay part of my compensation in its company stock. What are my tax consequences?

A:  If the stock does not have much value, take the stock right now and have the company pay you a bonus equal to the taxes payable on receipt of the stock. The stock received is treated as compensation so the company needs to withhold on it. Otherwise, there are a variety of employee stock option programs that could meet your needs.

Also, you'll want to verify that the stock qualifies under IRC Sec. 1244 and you own it without restrictions. Sec. 1244 stock allows an ordinary loss, rather than a capital loss, on sale, or if the stock becomes worthless - a big advantage in such a circumstance.

Q:  I bought a home in California 7 months ago and now want to sell it and move to Portland. I'll make $44,000 on the transaction. May I rollover the gain into my Portland home?

A:  When you transfer property to a charity, the amount of the deduction, in general, is based on the fair market value of the property at the time of transfer. When inventory or stock in trade are donated, as well as a capital asset held less than one year, your deduction is limited to your basis in the asset.

Q:  Do you believe an off-shore asset protection trust can be successfully used to defeat a creditor's claim?

A:  No. In my view, the creation of an off-shore trust to thwart U.S. law or potential creditors is improper, usually fraudulent and sometimes illegal. There could be legitimate uses for off-shore trusts, such as estate planning with multi-jurisdiction beneficiaries, but such trusts must comply with IRS disclosure and reporting requirements.

The browsable version of this page: September, 2003 FAQ

All contents copyright © 1995-2003 Robert L. Sommers, attorney-at-law. All rights reserved. This internet site provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet® is a registered trademark of Robert L. Sommers.