USA - Gift? Taxable?

[trybefore 6]

For the last 6 years I've been helping a young German lad set up a industrial business in the USA.

His parents are friends of ours and I've done it for free. L'm retired dual Brit/German but my experience is a European industrial marketeer.

He regularly asked me how much I wanted for my help and I always replied that he couldn't afford me and I was having fun.

At Xmas he told me he had given me some shares in his company. I don't know how much as it didn't matter to me. I never signed anything.

Last week he told me that he was selling the company and its IP for $5 mill and I would get a payout probably at the end of this year. I don't know how much.

 

Obviously I will need to get professional advice, but any heads-up? Is it a gift? Is it taxable? How do I best handle it.

[El Jeffo 42,135]

Yeah, it'll certainly be taxable. Since you advised the guy and he gave you the stock in return, it's debatable whether it's really a gift or whether it's compensation for services rendered. You'll probably be able to make that call after discussing which approach would be better with your accountant (and potentially do a contract after the fact). That would be for 2018.

 

For 2019, you'll probably have to pay capital gains tax on the difference between the declared value of the shares (whether a gift or in compensation for services rendered) and what you ultimately receive.

 

Please note that I'm not an accountant or a lawyer, however.