Thin is in; When a house is not a home; and do I have Qualified Small Business Stock.
1. Saving money and turning a profit are hip these days.
Column One in the L.A. Times today is about the "new" Dot-Com life style these days, and thin is in. Does that mean that upscale digs on the Westside of Los Angeles are out and downtown Los Angeles is in? How about expensive parties in Soho, a.k.a. Silicon Alley? We suggest that getting good employees is the real issue, and having creative compensation packages are 'in'. Also having a product to sell helps, whether Dot-Com or bricks and mortor.
Philip and Alex's Guide to Web Publishing, by Philip Greenspun, which is totally FREE, is an interesting blue print for anyone interested in starting their own "Dot-Com" startup, whether by the former tax partner of a nationally known legal firm, or for a dentist who enjoys computers and dentistry, and wants to make the "practice easier."
Leave the consumner market alone Greenspun says, and go after making life easier, to wit, less expensive, for the business person. How about making it easier to qualify as an Enterprise Zone Business ["EZB"] under IRC Section 1397B so that the tax incentives for these companies can be had? Or how about the same for Low and Moderate Investments ["LMI's"] which may qualify for 39% investment tax credits under the President's New Market proposals?
Where are the new sports facilities located, more likely some are near or within Empowerment Zones, or Enterprise Communities, if located in the inner city. See: the Taxman's website for the San Diego Baseball Park/Entertainment/Multimedia District, or Seattle's new sports facilities in Pioneer Square. What happened to Staples Arena or Conseco Fieldhouse?
2. Digital is in and the tax code will never be the same.
We have heard of cell phones, e-mail, and the highspeed internet, but Sony is on to something with their digital cameras, which can then be hooked to their computers, or others, and the pictures or x-rays, sent via highspeed internet. Doctors and dentists can now take digital x-rays and see their results immediately, or use digital cameras, all of which can be saved on a hard disk.
It also means that a doctor or dentist can view and take care of his patient outside of the hospital or office, at any time, and truly be on call 24/7/365 via the internet. If that is so then it may be necessary that the doctor or dentist's employer must give him the proper 'digs' to do all this work in a professional manner, whether at office, home, or from whereever. In short the home-based business can now be expanded outside the home, with the same tax consequences under IRC Section 119.
3. We are going public, what shall I do?
Employees have never had it so good, we have been told, but do they really understand what all these stock plans are about? How about the companies, do they know? Based on conversations over the last six months it is clear that the term Qualified Small Business Stock, as defined in IRC Section 1202, is not on many radar screens.
However, it is the startup C Corp., which may have come from an earlier Limited Liability Company [LLC], or the profitable company with outstanding stock options that is our primary candidate, if gross assets are under $50M and the stock is issued after August 10, 1993. Moreover, it does not have to held for five or more years to qualify for IRC Section 1045 Roll Over status, so long as the gains are capital gains. [Coming soon, an EZB may get IRC Sections 1045 and/or 1202 treatment, says the Wall Street Journal]. A tax dollar deferred is a tax dollar never paid someone once said.
Jim Schneider, LL.M.
The Taxman86 Speaks... is copyright 1998-2010 by James E. Schneider, LL.M. Inc.