Nebraska Still Allows Structured Avoidance of Capital Gains Taxes (Even to Family Members)

Every Nebraskan business owner (or their trust) should be aware that they are entitled to claim a one-time capital gains exemption from the sale of their stock.  The exemption is seemingly not available when there are less than five shareholders and at least two of those shareholders who are not related to each other – but not so fast.  Artful drafting of sale documents would allow the placement of strawmen shareholders to meet these requirements which would create substantial tax savings for a just a few additional pages of paperwork.  Normally this sort of structuring is a no-no under normal tax rules.  But not in Nebraska.  The Nebraska Supreme court in 2016 interpreted the statute to allow this sort of structuring and the Legislature has not yet acted to update the statute to prevent this practice.  Nebraska business owners should consult their accountants and deal counsel to make sure that if this benefit is available to them that their documents are drafted in a way that takes advantage of the statute as interpreted by the Supreme Court.