Stock Purchase Agreement-S Corp.

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  • Bird Legs
    Senior Member
    • Jun 2005
    • 990

    #1

    Stock Purchase Agreement-S Corp.

    3 stockholders in S Corp. There is a stock purchase agreement where the corp.pays the
    insurance premium and the S Corp. is the beneficiary. Upon the death, retirement,
    of a stockholder, owner, then that stock is bought back by the corp. using the
    insurance proceeds.
    Now, the thinking is, they want to change this. The corp. would continue paying the
    insurance premiums but the individual stockholders would be the beneficiaries.
    Upon death, retirement, the insurance proceeds would go directly to the heir.
    Recognizing that the premiums, in this scenario, would be taxable to the individual
    stockholder, what would be the advantage of this scenario over the original stock
    purchase agreement?
    Thanks for all of your enlightened advice.
    It is appreciated.
  • JON
    Senior Member
    • Jul 2005
    • 1265

    #2
    Cash surrender

    value is taxable to the insured-once the change is made....

    Comment

    • Bird Legs
      Senior Member
      • Jun 2005
      • 990

      #3
      Insurance -Stock redemption

      Jon, you say the cash value of the insurance is taxable to the beneficiary immediately
      when the change is made? Even tho no money has been received by the beneficiary?
      And the corp. is the owner of the policy?
      I really do appreciate your response. This was something that I had not considered.

      Comment

      • JON
        Senior Member
        • Jul 2005
        • 1265

        #4
        The value of

        the policy is transferred and a taxable event has happenned-unless they pay cash to the corporation. Transfer of a policy with value is a sale. Can be break even if the fair market value is paid. The only ones I have seen were given as a bonus and included their compensation and W-2. It is no different then having the stockholder take any other asset of the corporation.

        Comment

        • Bird Legs
          Senior Member
          • Jun 2005
          • 990

          #5
          Jon-What is the

          advantage of doing it this way, over the original corp. being the beneficiary & owner of the policy?
          Again, I really appreciate your comments.

          Comment

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