FACTOR	CONSIDERATION
Number of parties	The larger the number of parties, the more complex the establishment and administration of a cross-purchase plan will be. This would include a far greater number of insurance polices if that was the funding vehicle.
Age and ownership differential	The greater the age difference, the larger the financial obligation imposed upon the younger/minority stockholder or partners, under a cross-purchase plan. An entity plan may be preferable since it allows for a pooling of the premium obligations within the business (corporate dollars).
Life insurance funding	An entity purchase plan would not necessitate the business owners’ personally paying premiums for funding life insurance. However, split dollar life insurance may assist in funding a cross-purchase.
Cost basis	Since a cross-purchase plan generally will result in the surviving owner receiving a higher cost basis for the business interest, the survivor would incur lower capital gain for any subsequent sale.
Attribution of ownership rules	Due to potential dividend taxation under Internal Revenue Code Section 301, redemption may be inadvisable for a family corporation. Therefore, a cross-purchase plan may be the only viable approach.
Possibility of plan change	If the parties anticipate that they may change from one type of plan to another, the effect of the transfer-for-value rule {Internal Revenue Code Section 101 (a)(2)} favors the initial establishment of a cross-purchase plan for a corporation, since the policies could later be transferred to the corporation to fund a redemption without creating a transfer-forvalue. However, the parties normally would not be able to transfer the policies from the corporation to the non-insured stockholders to fund a cross-purchase plan, without creating a transfer-for-value and, therefore, subjecting the death proceeds to income taxation
Tax considerations	Funding a stock redemption agreement requires attention to be paid to possible accumulated earning tax and the corporate alternative minimum tax. A cross-purchase plan can ignore these concerns.
Tax bracket	If the corporate tax bracket is higher than the policy-owner’s individual tax bracket, a cross-purchase arrangement would be the logical choice and vice-versa.