Academic journal article Journal of Accountancy

Father's Gift of Stock Occurred Earlier Than He Thought

Academic journal article Journal of Accountancy

Father's Gift of Stock Occurred Earlier Than He Thought

Article excerpt

Claude Autin was a successful marine industry executive who sought to establish his only child Bobby in the business. In an effort to launch his son's career, Autin formed a separate company, Louisiana International Marine Inc. (LIM). Because Bobby lacked experience, Autin thought it would be better if he was perceived as the company's principal owner.

When LIM was incorporated in 1974, 51 shares were issued in Autin's name and 49 in Bobby's. At the same time, Autin executed a counterletter agreement in which he said he had no ownership interest in LIM. The counterletter also contained Autin's commitment to transfer to his son, at some unspecified time in the future, all title and interest that Autin had or would have in LIM stock.

In 1988, the record of ownership of the 51 shares was changed to Bobby's name. The Internal Revenue Service said this change constituted a taxable gift, contending that Autin -- as the owner of record, LIM president and a listed shareholder in LIM minutes -- had been the legal owner of the shares. Although he also had been listed as a shareholder on LIM's tax returns, Autin did not claim to own the shares on personal financial statements. He said the counterletter vested ownership of LIM in Bobby at the time of incorporation, so he never had owned the shares and no gift had occurred at any time. …

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