Question
Margie and her sister, Jan, each own half of the shares of a closely held business. Margie is concerned about what will happen to the
Margie and her sister, Jan, each own half of the shares of a closely held business. Margie is concerned about what will happen to the business if Jan dies because Jean just married a man who Margie cannot stand. Jan is also concerned because, although Margie is currently single, she has children from a prior marriage who Jan feels are spendthrifts. Neither sister is ready to quit the business and retire. Neither sister is financially able to pay a gift tax or a capital gains tax.
Which one of the following is the most appropriate business transfer technique for Margie and Jan to use in this situation?
A) A cross-purchase buy-sell agreement between the two sisters
B) A preferred stock recapitalization of the business
C) An installment sale contract between the two sisters
D) A private annuity agreement between the two sisters
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