"randall[at]nospam.com wrote:

- quote -

Ask your most compentent advisor to look for the Clark case.
I think that was the name of it. If you can structure your
sale to resemble the way Clark did it, you can get a very
favorable result. Don't be looking on message boards for
answers for $3M tax questions, but you are allowed to trust
answers you get when message boards point you to the answers
and your paid professional advisors do the proper leg work.

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"randall[at]nospam.com wrote:

- quote -

First of all, this transaction is probably a lot more
complicated than you describe. My response is based on the
facts given and some assumptions made from the reported
responses of your attorney and CPA.

You need to find someone who has extensive experience with
corporate reorganizations. They are very complex, and most
people, including most attorneys and accountants, don't
understand them.

The way this is structured does not qualify as a tax free
reorganization under IRC section 368. Because of that your
CPA is probably correct. Sounds like your attorney doesn't
have a clue what he's talking about.

If you get all stock instead of some cash, you may qualify
the transaction as a tax free reorganization under IRC
section 368(a)(1) (B). You'll then get $3.6 million worth
of stock with a basis of $600,000, and have no taxable gain
at that time. You could then sell $600,000 worth of stock
and pay a capital gains tax on $500,000.

Stu

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I have an offer to sell my company to a publicly traded
company in return for cash and shares of their stock.
My problem is that my attorney, my accountant, and my
brother who is a CPA are all telling me different stories.

Facts:
+ My capital account is $600,000 and taxes were paid on
that money over the years.
+ The offer is cash = my capital + $3M in their stock

Story I like the best:
+ Make the sale two simultaneous transactions where I get
the cash for the capital account and the stock for the
business.
+ The cash has no taxes due and the stock is taxed as a
capital gain as it is sold.

My attorney:
+ No tax on the cash.
+ The stock is taxable as a capital gain in the year
received.

My accountant:
+ The cash and the stock are lumped together so that I have
a $3.6M package with a $600K basis.
+ So $500K of the cash is treated as a capital gain.
+ The stock is taxed (less basis) as a capital gain as
it is sold.

I've been told that this is an excellent place to get sound
advice. Please help.

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