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Small Corp C stock conundrum / qualified dividends
Old 08-12-2022, 06:50 AM   #1
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Small Corp C stock conundrum / qualified dividends

I need some business/ tax advice. I am one of 6 stockholders in a very small, private Corp C business. For various reasons which I won’t go into, 4 of the stockholders want to turn in their stock. However, they have lost their certificates. The plan is to cancel all stock certs and then reissue new stock certificates for the remaining 2 shareholders. For the first time in the history of the company, there is enough cash to declare a dividend, which everyone agrees that will go to the 2 sole stockholders. In order for this to be considered a “qualified dividend” would the company have to wait the required 60 days after reissuance? I think so. What say you? Will I receive a 1099-DIV at the end of the year showing it was quaified? I'm new to all this.
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Old 08-12-2022, 07:19 AM   #2
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You don’t need the certificates. Do it on a company ledger showing the transaction, remaining shares, etc. You just need to document the details. The IRS doesn’t care about the certificates.
The bummer part is the corp will still pay taxes on the money used for the distribution and so will you.
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Old 08-12-2022, 07:40 AM   #3
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Do not the qualified dividends get treated the same as long term capital gains? Fed taxes by me are 0 if under the AGI limit, no? I think I will have to pay state tax on the dividends.

The option at the time were for me to "work" and not only pay income taxes, but also pay into SS etc.
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Old 08-12-2022, 07:51 AM   #4
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Do not the qualified dividends get treated the same as long term capital gains? Fed taxes by me are 0 if under the AGI limit, no? I think I will have to pay state tax on the dividends.

The option at the time were for me to "work" and not only pay income taxes, but also pay into SS etc.
Not enough info on your total tax situation to comment.
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Old 08-12-2022, 10:40 AM   #5
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Thanks. I wasn't specifically asking about my personal tax situation and which is better or worse way to go. I am inquiring about the IRS qualifications for cancelling and reissuing stock and treating dividends as "qualified".
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Old 08-12-2022, 11:26 AM   #6
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Thanks. I wasn't specifically asking about my personal tax situation and which is better or worse way to go. I am inquiring about the IRS qualifications for cancelling and reissuing stock and treating dividends as "qualified".
I thought I answered that already. Don’t reissue certificates because they are not necessary. I went through this exact scenario with 7 owners down to 2 and certificates were never required. Thus the clock never restarts on the holding period.
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Old 08-12-2022, 03:36 PM   #7
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CRLLs did someone tell to cancel and reissue the stock? If so what was the reasoning...
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Old 08-12-2022, 06:56 PM   #8
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CRLLs did someone tell to cancel and reissue the stock? If so what was the reasoning...
I am not handling this personally. To answer your question, the CPA suggested it. I don't have any reasoning. It seemed unnecessary to me.
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Old 08-12-2022, 07:01 PM   #9
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I thought I answered that already. Don’t reissue certificates because they are not necessary. I went through this exact scenario with 7 owners down to 2 and certificates were never required. Thus the clock never restarts on the holding period.
You did answer it. And I thank you. then you added: "The bummer part is the corp will still pay taxes on the money used for the distribution and so will you."

I don't understand that part as being an absolute. As I understand it, I pay taxes only if my AGI is above a certain limit. There is no need for you to answer it now. I think I know the answer.
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Old 08-12-2022, 07:07 PM   #10
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I can't speak for CO but I imagine he was saying it does expose the owner/recipient to possible double taxation. Just as a general tax law
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Old 08-12-2022, 07:38 PM   #11
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I can't speak for CO but I imagine he was saying it does expose the owner/recipient to possible double taxation. Just as a general tax law
Exactly
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