"Rather than disposing of stock in a closely held business (by sale or corporate reorganization) at retirement the retiree may decide to transfer all or a portion of the stock by gifts to various family members." Streng & Davis, Tax Planning for Retirement ¶ 7.05 (Thomson Reuters Tax & Acct’g 2018). Three important objectives can be achieved by making gifts of closely held business stock to family members:
It eliminates the stock's dividend income from the gross income and the estate of the retiree/donor
It removes the value of the stock from the retiree/donor's estate for federal estate tax purposes upon the retiree's death
It solidifies the interests of the family members receiving the stock as officers of the closely held corporation, enabling them access to corporate executive compensation arrangements and other benefits.