Problem - You have been asked to advise his estate on the following.
Mike's gross estate includes:
1. 1,000 shares of Park limits, Inc. This is Mike's military development company. His basis in the shares is $ 350,000. The date of death value is $1,500,000. It was a great deal of E & P. The balance of the stock is owned as follows:
Mary Park, his wife, owns 400 shares.
Gabby (Joey's wife, Joey is Mikes son) owns 90
Leah, no relation, owns the remaining 510.
2. 610 shares of Park tree, Inc. This is Mike's commercial company. His basis in the stock was $190,000. It's FMV at the time of his death was $1,100,000. It too had overwhelming E & P. The balance of the stock is owned as follows:
Joey, his son, owns 100 shares.
Mary Park owns 90 shares.
Gabby owns 100.
susan, the maid but otherwise no relation, owns 100.
Taxes and administration expenses are $980,000. The total estate is $6,500,000. Mary and Joey are the sole heirs of the estate.
Mary, the executor, asks you:
What are the tax consequences to the estate if it redeems stock to pay off the taxes and expenses? Does it matter which stock is redeemed?
What are the tax consequences to the estate if all of its Parks stock is redeemed by the corporation for FMV?
What are the tax consequences to the estate if all of its stock is redeemed by the corporation for FMV? No stock of the other shareholders will be redeemed.