Re: sponsibility

From: Gordon Mohr (
Date: Mon Apr 02 2001 - 22:10:06 PDT

Jeff Bone writes:
> Gordon Mohr wrote:
> > 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. ;-)

My understanding is that this is almost always how a
stock-for-stock acquistion is done. In your scenario,
given that the PrivateCo marketing director had exercised
his options a year before the transaction, a typical
exchange-of-stock acquisition would generate *no*
taxable event -- and no recognition of a gain.

(I regret directing things back to the personal experience
of Jeff and I, but in fact this is how the CMGI-Activerse
transaction worked, at least by my understanding -- and how
I filed my taxes. I didn't recognize the exchange of private
Activerse stock for public CMGI stock as a regular tax gain,
but the day-before exercise of options *did* trigger an AMT

> > 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.

Yes. I'm quite amazed that there isn't more talk of immediate
and/or retroactive AMT tax relief for the (probably thousands
of) average folks who have paid AMT taxes on gains that were
never really recognized via a sale -- independent of any other

- Gordon

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