Re: sponsibility

From: Jeff Bone (
Date: Mon Apr 02 2001 - 18:01:57 PDT

Gordon Mohr wrote:

> One mitigating factor: you can deduct more than $3000/year in
> capital losses, against net capital gains. So to look on the
> bright side, in this hypothetical, the poor guy gets his next
> $990,000 in lifetime capital gains tax-free.

This is true --- he has any future windfalls covered for a long time. Of course,
if that turns out to be his "one show, goodbye" --- he'd pretty much screwed. He'd
better be ready to suit up and do it again post-haste.

> Separately, a stock-for-stock acquisition does not have to
> result in a taxable event for people holding the target
> companies' stock. I believe it is usual for deals to be
> structured so that the acquired company stock is replaced
> with acquiring company stock in a tax-free exchange.

Noodling on how this is done --- not clear. "I've heard rumors to this effect,"
but for the life of me I can't figure out how and I don't know anyone who's been
able to structure one of these this way. If it's a pooling transaction, how does
that impact it? AFAICT, there's no way to avoid at least some taxable event,
assuming one of the cos is a privateco and one's a publicco. The goal is to make
that taxable event as minimal as possible; better hire good atty's. ;-)

> So, a version of this scenario where the hit comes from an
> option-exercise AMT would be both more typical and more
> troublesome -- because an AMT credit is even harder to
> "earn back" against future gains than the capital-loss.

Yup, damn them... also note that the AMT issue is more likely to effect the
"working man" types in the company than the officers, etc. Double-damn.


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