When I formed the company through which I freelance, I allocated a few percent to my brother who intended to help out a bit with running it. As it turns out he hasn't had much to do with it, so we've both decided its not really fair that he should continue to receive this portion of the dividends in perpetuity and so he wants to gift his entire holding to me (I will then own 100%).
My question is, for the purposes of tax, how can we establish a fair value for these shares given that the dividends they receive are entirely derived from my freelancing earnings and are completely dependent on how much of that I choose to take as salary?
One might attempt to value it in terms of the earnings per share over the last few years, but I can't imagine a random third party wanting to pay a typical P/E ratio for the shares on the assumption things would continue in the same way. Clearly I could arrange things so that the minority shareholder received nothing should I be so inclined.
My question is, for the purposes of tax, how can we establish a fair value for these shares given that the dividends they receive are entirely derived from my freelancing earnings and are completely dependent on how much of that I choose to take as salary?
One might attempt to value it in terms of the earnings per share over the last few years, but I can't imagine a random third party wanting to pay a typical P/E ratio for the shares on the assumption things would continue in the same way. Clearly I could arrange things so that the minority shareholder received nothing should I be so inclined.
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