When company’s net assets are steadily increasing, consider donating stocks as a gift [Tax saving measures for inheritance tax]

If a family member has been running a company for a long time, you may be concerned about how to handle the inheritance of the company’s shares.

If the company’s net assets are below 0 yen, the appraised value of the shares is 0 yen.

However, if it is more than that, the shares will be appraised as property.

Eventually they will become inherited property and be subject to inheritance tax.

The higher the company’s appraised value, the more tax you will have to pay.

So, one way to reduce inheritance tax is to gift the shares in advance.

However, it can be difficult to determine when and how best to make a gift.

In this article, I will write about the appropriate timing to gift company shares as a way to save on inheritance tax.

Company shares are subject to inheritance tax

In the case of a family-run business, it is rare for company shares to be sold to outside parties.

In many cases, they are held continuously.

Therefore, you may not think of shares as an asset, but they are valued as a legitimate asset.
(If the net assets are positive)

The tricky thing about company shares is that they cannot be sold and converted into cash.
(In continuing the business)

Inheritance tax is levied on the assessed value of the shares.

In principle, payment is made in cash.

Therefore, if you inherit company shares, you will need to secure a certain amount of cash funds to pay the tax.

If you want to save even a little on inheritance tax, I recommend making a gift in advance.

If business performance is on the rise, it is best to give early

Even if you make a gift in advance, it can be difficult to decide when is the best time to make the gift.

When the value of the company is expected to increase in the future, making a gift early is likely to result in inheritance tax savings.

If you make a gift early, the capital gains from the shares will accumulate as profits for the person who received the shares.

If you do not make a gift, future unrealized gains will be subject to inheritance tax.

Conversely, if you expect business performance to worsen in the future, there is no need to rush into making a gift.
(This could actually increase the gift tax burden.)

Conclusion

When an inheritance occurs, there are only a limited number of inheritance tax-saving measures that can be taken.

Ideally, tax-saving measures should be implemented in a planned manner before the inheritance occurs.

It is effective to understand the current situation and take possible measures as early as possible.

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都築太郎税理士事務所/Tsuzuki Taro Tax Accountant Office

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