Hi, my client worked for a private co and a public co bought them out in 2006 and paid cash and unregistered stock. The stock will be registered in 2007 so can the gain be picked up in 06 & 07 by prorating or should it all be picked up in 06? Thanks
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Not really enough information... not sure I understand your client situation.
The fact that the stock is "unregistered" probably has nothing to do with determining gain or loss on the deal. If you want more discussion on the taxability of the deal you would have to tell us what type of entity was bought-out and what exactly did your client sell. -
unregistered stock
Hi, The amount of the gain is not what i'm asking, but whether the portion of the sales price attributable to the payment by unregistered common stock by the publically traded acquiring co can be deferred until june 07 when they will register the stock that they issued to my client. My client worked in a private corporation that was taken over by the public co.
ThanxComment
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Just what
do you mean by 'unregistered" stock anyway?
All capital stock must be authorized by the state of incorporation
and then when transferred to a stockholder, whether original
issue or subsequent sales by two parties be duly recorded
on corporate stock transfer ledger.
please explain.ChEAr$,
Harlan Lunsford, EA n LAComment
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>>The fact that the stock is "unregistered" probably has nothing to do with determining gain or loss on the deal.<<
Still holds true in my opinion... if stock was received in 2006, the deal was in 2006, and the gain on sale of something in exchange for stock is taxable in 2006, UNLESS the sale was C-corp stock being sold/exchanged it might then be excluded under §1202 (50% of gain excluded) or it might be 100% gain exclusion under §1045 (rollover of gain on sale of small business stock). Or it might even be a tax-free exchange of stock or tax-free under mergers and reorganization. It may not be as simple as you think, best gether more facts and do some research.Comment
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Unregistered stock
Unregistered stock is stock that is restricted, i.e. it can't be sold until a certain date. Until the stock is registered, it is not counted as income, because the owner doesn't have the ability to sell it.Comment
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yes, until 2007 the stock can not be sold
Dervis, Unregistered stock is stock that is restricted, i.e. it can't be sold until a certain date. Until the stock is registered, it is not counted as income, because the owner doesn't have the ability to sell it.
Yes, in 2006 this private "c" corp was taken over for cash and unregistered restricted stock , which becomes registered and unrestricted in june 07. It's similar to being in an escrow account in that until june 07 it can't be sold , so how can the taxpayer pay cap gains tax on something that can't be sold until 2007?
Would you know a reference for your opinion or the IRS code number? ThanxComment
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