On Tue, 2 Sep 2008 12:03:24 EDT, "removeps-groups[at]yahoo.com"
<removeps-groups[at]yahoo.com> wrote:

- quote -

Because the law says it isn't. RIA has this to say on the
subject:

"Unlike organizational expenditures, which are treated as
creating a capital asset (see ¶ L-5201 et seq.) that can be
either amortized or deducted on dissolution of a corporation
(see ¶ L-5503 ), expenses of issuing stock only reduce the
net amount received from the sale or exchange of the stock.
1 The rule applies whether the expense is paid in cash or in
the corporation's stock. 2

------------------------------------------------ 1

Barbour Coal Co v. Com., (1934, CA10) 14 AFTR 818 , 74 F2d
163 , 4 USTC ¶1367 , cert den(1935, S Ct) 295 US 731 , 79 L
Ed 1680 ; Simmons Co v. Com., (1929, CA1) 7 AFTR 8783 , 33
F2d 75 , 1 USTC ¶406 , 5 USTC ¶1569 .
------------------------------------------------ 2

Hollywood Baseball Assn, (1964) 42 TC 234 , acq 1964-2 CB 6,
affd on other issue(1965, CA9) 16 AFTR 2d 5855 , 352 F2d 350
, 65-2 USTC ¶9718 , vacd on other issue(1966, S Ct) 17 AFTR
2d 645 , 383 US 824 , 16 L Ed 2d 291 , 66-1 USTC ¶9327 ;
Steinberg, Saul, (1983) TC Memo 1983-534 , PH TCM ¶83534 ,
46 CCH TCM 1238 , affdsub nom Pulte Home Corp, (1985, CA6)
56 AFTR 2d 85-5878 , 771 F2d 183 , 85-2 USTC ¶9660 . "

--
Drew Edmundson, CPA
Cary, NC

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Seth wrote:
- quote -

business expense.

Publication 535, dealing with business expenses mentions costs of
issuing stock (certificates, printing, postage, etc) as not deductible,
but a "sunk" cost. Paying someone to help finance the business is a bit
different.

And BTW, my last Intermediate accounting text, dated 1974, by Meigs, et
al, refers to Preferred Stock as equity.

ChEAr$,
Harlan Lunsford, EA n LA

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <d263c58c-a26e-43e2-a6b2-62e5e4a2e794[at]s9g2000prg.googlegroups.com> ,
removeps-groups[at]yahoo.com <removeps-groups[at]yahoo.com> wrote:
- quote -

It's a cost of raising capital, not of doing business.

Seth

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Harlan Lunsford wrote:
- quote -

am aware of. The SEC requires that all public companies remove
from stockholder's equity all stock that the company is
mandatorily obligated to redeem at either a specified price or
readily determinable price on either a specified date or readily
determinable date.

I have never personally seen this so I had to some research. It
seems that public companies that have stock that falls into this
category, remove the entry from stockholder equity and list it
separately on a line between liabilities and equity.
I have no idea what this makes it. However, when a company is
obligated to repay its investors and also pays them a return on
an ongoing basis for this investment, it certainly looks like a
liability.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Arthur Kamlet wrote:
- quote -

I meant to do some research at office today, but no time. Sent out an
email newsletter to clients and friends instead. (for a copy, email me!
grin)

So for now, to my mind, Preferred stock, convertible or not, is equity.

As for the cumulative feature, any dividends supposed to be paid, but
not paid due to an impairment of cash, accrue on the books as a
liability, just as common dividends accrue on dividend date until paid.

ChEAr$,
Harlan

p.s. and no, you did no "cloud the issue." (grin

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Aug 30, 11:32 am, "Mike" <mickey9...[at]hotmail.com> wrote:

- quote -

Why is this not an ordinary business expense, deducted in the year it
was paid?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <RB1vk.18538$bx1.14850[at]bignews1.bellsouth.net> ,
Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:
- quote -

I don't speak accountantese, but wonder if Convertible Preferred
is equity, but nonconvertible preferred is a liability?

OT, but I think the wash sale instructions say Preferred
Stock that is convertible to common is substantially identical
to the common, but nonconvertible preferred is not?

And does cumulativity [I just made up that word; it has nothing
to do with storm clouds] add to the liability?
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Dick Adams wrote:
- quote -

Wonder whee i went wrong. I never lernt it thataway.

In fact on all balance sheets I've EVER seen (a lot!), it's always part
of Stockholders' equity.

ChEAr$,
Harlan

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Gil Faver <rowdy'sboss[at]xxyz.com> wrote:
- quote -

Preferred Stock is a long-term Liability. While it is
possible for an issuance of Preferred Stock not to have
a Call Date, that would seem unlikely. If someone has
a current Intermediate Accounting textbook or the FASB
on Preferred Stock, they can give us the answer.

Dick

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Dick Adams" <rdadams[at]panix.com> wrote in message
news:g9d4uv$4os$1[at]reader1.panix.com...
- quote -


how do you amortize over the life of preferred stock,if the preferred stock
had no "termination" date? I'm no expert on preferred stock.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:
- quote -

For tax purposes, underwriting expenses are treated as an
intangible and amortized over a minimum of 60 months.

For GAAP purposes, if it were Common Stock, the AICPA says
it is a current expense. But since it is Preferred Stock,
I agree with Harlan that it should be recorded as a contra
account (Discount on Preferred Stock) and amortized over
the life of the Preferred Stock.

But then I may be a CPA, but I am NOT an Accountant and
almost everything I know about Taxation comes from this
newsgroup.

Dick

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Bill Brown wrote:
- quote -

(snipped.....)_

I'd need to look it up, but instead of an intangible asset on the books,
wouldn't it not be a decrease in capital? IOW, a debit to a separate
capital account such as.... "Discount on Preferred Stock"?

What do you say, Dick?

ChEAr$,
Harlan

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Bill Brown <brownwp[at]longwood.edu> wrote:
- quote -

When a company makes a public offering, how do they treat the
commission paid to the underwriter? Seems to me to be an analogous
situation.
- quote -

Generally it's a difference between a private offering and a public
offering. The distinction is not completely intuitive - it's
relatively difficult to qualify as a private offering, and everything
else is public. And if it's public, it has to be registered with the
SEC.

Stu

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Aug 30, 2:32*pm, "Mike" <mickey9...[at]hotmail.com> wrote:
- quote -

Sounds like an unamortizable increase in the investment account
(asseet) to me.

- quote -

K) and quarterly (10-Q) reports with the SEC when it meets certain
criteria. The Small Business and the SEC Q&A at http://www.sec.gov/info/smallbus/qasbsec.htm
may provide the answers you need.

If your client is required to register with and make reports to the
SEC, then it is likely time to bite the bullet and refer your client
to a local CPA firm that already has SEC registered clients.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

A new corporate client paid out nearly a million dollars in 2 years as
"finders fees" to get nearly four million invested in the company as
preferred stock.

Is this an amoritizable expense? If so, under what IRS section/reg...

At what point is a corporation required to start filing with the SEC? We
have no SEC clients and therefore little experience in the area.

Mike

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >