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Tax and valuation implications of shares entitled to future growth only
It has been suggested to a client who owns a property investment company that a new class of share should be created that has no entitlement to the current value of the company but will assume any increase in its value.
The plan is that the new shares will be gifted to the client’s adult children. Presumably this will operate as an inheritance tax mitigation strategy by keeping the future growth of the company outside the client’s estate.
Our concerns are how one might value these new shares. Presumably the gift of these shares will represent a disposal at market value for capital gains tax purposes.
It seems over-simplistic to suggest that the new shares have no value at the date of the gift because even if the value of the property portfolio remains constant the future rental income stream will result in a...
