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What are the tax implications for spouses that purchase stock in a private corporation?
Posted by admin on Oct 4th, 2008
katty_jb asked:
My husband purchased stock in a private corporation. The corp. is in the process of printing out the stock certificates for the investors and they want to know whether or not we want just my husband’s name on it or both of our names on it. Does anyone know the tax implications/consequences for both scenerios?
My husband purchased stock in a private corporation. The corp. is in the process of printing out the stock certificates for the investors and they want to know whether or not we want just my husband’s name on it or both of our names on it. Does anyone know the tax implications/consequences for both scenerios?
There is little, if any, difference in the tax ramifications. In the first place buying stock creates no taxable event – it simply establishes the cost basis, which is subtracted from the selling price to determine the capital gain. The question has much more to do with ownership: If it is in his name only then you won’t get the stock if he dies it except by will. If it is in both names as joint owners with the right of survivorship then the surviving spouse owns the stock and it does not have to pass via a will through probate.
The only reason I can think of to put it in his name is if it pays a dividend (which it probably does not) and you are the big income earner and you file separately.
The tax implications occur on the death of one of the spouces. If both names are on the certificate, the shares are not considered part of the estate provided they are issued as joint tenents with rights of survivorship. The shares immediately belong to the survivor. However, taxes may be due on the half that was transfered over if the estate is large.