Hey guys
So Shareholder A and B each hold 50% share of the company. Lets say they initially put par value at $10. Now A would like to sell all of his shares to B for 70k. Does this in anyway affect the balance sheet? Some have suggested that equity should now be increased to $70,000 because of the purchase!? I feel that this is not correct as this has nothing to do with the corporation, it was a transaction between 2 individuals. Could anyone shed some light on this matter please? Really appreciate your response!!!
Hi there…Transaction between A and B does not affect the Balance sheet. You might need to advice A to consider claiming LCGE if qualification criterias are met.
1 Like
yes I think so too. The equity should increase only if they are issued by the corporation itself, and not merely transfer among its own shareholders. Thank you for confirmation!
Just keep track of the PUC & ACB on your working paper.
Purchaser’s PUC is now $20, But ACB is $70,010.
4 Likes
This is the way.