STINVESTOR –
Your plan is a good one and already funded. We do not know the exact set of circumstances that may be involved. This is why I don’t feel good about starting a thread here on the IDCC forum about such a detailed subject that borders of an “off topic” subject matter. The different scenarios are endless.
Consider the Corporate Officer owns “stock options” and needs cash for the exercise price and gift tax. Furthermore, I prefer to make the gift to the partnership in cash (unless the security involved is closely held) rather than in kind. Why?
Because:
1.) Capital Gains Tax must be paid by the individual making the gift (stated differently, the partnership does not receive a future tax liability attached to the gift)
2.) The individual making the gift also receives a reduction in his / her Estate by virtue of actually paying the Capital Gains Tax (no Gift Tax in incurred and a future benefit of reduced Estate Tax is realized)
3.) There is no “evaluation” problem regarding the shares for Gift Tax purposes (the sales price by the individual making the gift has no bearing on the price paid to buy the shares by the partnership – Note: I greatly prefer that the General Partner be a third party to avoid any possible conflicts of interest)
In brief:
1.) Sell the Stock
2.) Pay the exercise price
3.) Pay the Capital Gains Tax
4.) Pay the Gift Tax
5.) Make the Gift in Cash
6.) Pay any Attorney’s fees, CPA fees, Trustee’s fees, Appraisers fees in Cash
Do the math. The funding of such a plan leaves much more in the hands of the ultimate beneficiaries than postponing the “Financial Planning” function.
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