Gift to Corp?

[Snaggletooth]

For some reason, I've been confronted with lots of end-of-year issues. Good for my practice, I suppose. In the last few days I've started lots of posts. Here is another one which I hope has a simple answer - please don't confuse it with my other posts, although it is akin to some of the them.

FACTS: Dad owns a commercial warehouse, appraised at $1,100,000. He wants to sell to his son at a bargain price of $800,000. With the annual exclusion, he is willing to take the $276,000 on the chin against his uniform exemption, however, Tennessee will impose a 5.5% gift tax on any amount over the $24,000 exclusion. Dad is facing having to pay 5.5% of $276,000 to the State of Tennessee.

HOWEVER: Son is 100% owner of a Subchapter S corporation. Can Dad sell the warehouse to the S corp for $800,000 -- and by virtue of the corporation having eternal duration, escape the gift tax? Keep in mind that Dad, Son, and Scorp are ALL related taxpayers.

From all I can read, I think a gift is taxable to the donor for ANY PARTY except a recognized charity, but I thought I would run this one through the experts: y'all

[LWoods]

I haven't done any research on this particulaerly but a gift to a corporation is a gift to the shareholders of that corporation and since son is 100% owner of sub-s, it wouldn't seem to affect the gift tax ramifications. It would still be a bargain sale gift to the son. Yes?

[LWoods]

I haven't done any research on this particularly but a gift to a corporation is a gift to the shareholders of that corporation and since son is 100% owner of sub-s, it wouldn't seem to affect the gift tax ramifications. It would still be a bargain sale gift to the son. Yes?

[outwest]

Are split gifts a possibility?

I'm in a community property state so most assets are considered jointly owned by husband and wife.

If the son was also married, we would consider Dad gifting $24K to both son and daughter in law, and Mom doing the same. Bingo: $96K gone with no gift tax issue. 30 days from now in the new year, $96K again and most of the problem is gone.

As I said, I'm in a community property state where we assume everyone is married, shares everything happily, and will stay married. May not be the same in TN.

Doug

[ChEAr$]

related party

Last time I checked, in this case, dad is not a related party to the corporation.

Holiday ChEAr$,
Harlan Lunsford, EA n LA

[outwest]

Chuckle, ... true

but I was addressing the first option discussed of a bargain sale to the son.

Though I've heard of brother - sister corps, I've never heard of husband wife corporations...

Doug

[ChEAr$]

Of course not

but I was addressing the first option discussed of a bargain sale to the son.

Though I've heard of brother - sister corps, I've never heard of husband wife corporations...

Doug

a husband and wife is a partnership and we ALL know what happens to "partnerships" eventually. (grin)

Holiday ChEAr$,
Harlan Lunsford, EA n LA

[ChEAr$]

On a related note

I haven't done any research on this particularly but a gift to a corporation is a gift to the shareholders of that corporation and since son is 100% owner of sub-s, it wouldn't seem to affect the gift tax ramifications. It would still be a bargain sale gift to the son. Yes?

Suppose the gift is made to the corporation. What is therefore the basis of
the warehouse to the corporation?

Holiday ChEAr$,
Harlan Lunsford, EA n LA