Tackling Taxes

The federal income tax consequences of a bargain stock sale can be complex, especially when a US shareholder sells stock at a bargain price to an employee of a foreign subsidiary. The following four scenarios of bargain stock sales are examined: 1. A corporate employer (employer) sells shares of stock to an employee at a bargain price (employer stock sale). 2. A parent corporation sells shares of its own stock at a bargain price to an employee of a corporate subsidiary (parent stock sale). 3. A shareholder sells shares of stock of the employer at a bargain price to an employee of the employer (shareholder sale of employer stock). 4. A shareholder selIs shares of stock of the foreign corporate employer at a bargain price to a nonresident alien employee of the foreign employer (shareholder sale of foreign employer stock). The issues discussed should alert employers and shareholders to some of the potential pitfalls, tax obligations and issues of a bargain stock sale.