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Q: Avoid Tax Hit to me on Acquisition of Start-Up ( No Answer,   1 Comment )
Question  
Subject: Avoid Tax Hit to me on Acquisition of Start-Up
Category: Business and Money > Finance
Asked by: jagrmeister721-ga
List Price: $35.00
Posted: 03 May 2006 22:42 PDT
Expires: 02 Jun 2006 22:42 PDT
Question ID: 725315
Here is my scenario: Assume I am selling a company I started about six
months ago.   The company, a C corporation, has just authorized and
issued shares to myself and others.  The shares vest over three years
but will vest immediately in the case the company is acquired.  Assume
the sale happens in a matter of months- the acquiring company could
pay cash or pay with their own shares (at a conversion ratio to ours).
 What kind of tax liability will I face?  Income tax or capital gains?
 Regarding capital gains, I realize long-term capital gains kicks in
after one year.  How does this apply for shares which have been
allocated but have yet to vest?  Most importantly, what can I do today
to minimize my tax obligation in the case of an acquisition.  (I am
open to creative ideas, not just minor considerations, and my
objective is to ensure that when taxed, I will be taxed at the
long-term capital gains rate.  I am flexible in terms of who or what
holds title to the shares.)  Thanks and feel free to ask questions to
clarify this scenario.

[I would appreciate researched answers as opposed to references to
documents or web-pages]
Answer  
There is no answer at this time.

Comments  
Subject: Re: Avoid Tax Hit to me on Acquisition of Start-Up
From: ubiquity-ga on 04 May 2006 14:00 PDT
 
This questions has to many variable to get a good answer on a forum. 
Go see an attorney experienced in tax matters.

Unknown issues:
1.  You say shares vest at some later date, so who owns the Corps equity today?
2.  Is the acquisition going to be an asset purchase, or will they
assume the entire corp.
3.  What is your basis in the Corp?  What is your interest in the Corp
(%) and how much will it be sold for)

If it is simply a stock swap, the event should not be taxable.

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