What are "business premises" for purposes of IRC Section 119?; Urban revitalization is the "in" thing; Games are "in" too; Are those shares of common stock from the exercise of a qualified stock option taxable?
1. Silicon Valley here we come.
The Data Rush is on and everyone is coming West we are told. Housing prices are exploding, and traffic congestion is a big problem to say the least. Employers need employees and the New Economy is all around us. Congress wants to come to the rescue with two major bills supporting the concept of Telework. S. 2431, "The Telework Tax Incentive Act of 2000," and S. 2447, "The Telework Act of 2000." (Visit http://thomas.loc.gov for more.)
The Congressional Record Statements for these two bills is very interesting and strongly suggests a strong "congressional policy" to encourage employers to REQUIRE their employees to work from home. We suggest that the Internal Revenue Code may already do that in the form of exempting employer provided meals and lodging under IRC Section 119, if on the business premises. If the employer furnishes high speed internet, high speed computers, and then requires the employee to work at home, it seems like the employer may have made the "home" part of the business premises of the employer. This is clearly what the Department of Labor suggested in the now famous OSHA Letter.
Put all the above in common language, and what we have is the strong possibility that the employer could provide the employee's lodging without causing that lodging to be compensation, and that lodging may be the home of the employee. Is that result correct? We strongly believe that the IRS's own regulations, and case law supports that result, especially if the employee is "on call" on internet time, 24/7/365, with beepers, cell phones, faxes, and now e-mails, all paid for by the employer. Even employee training is going "online," on your employer-provided computer.
2. Every wine has its time.
Several years ago the National Trust for Historic Preservation made the revitalization of urban neighborhoods, and historic housing their number one priority. Yesterday in the Washington Post [May 13, 2000], and many other newspapers, one of the country's leading housing authorities, Kenneth R. Harney, suggests that this goal may be close to becoming reality. $40,000 in tax credits for rehab, WOW!!!!
If that is so then the conversion of historic buildings into live/work lofts could be very attractive. Combine that with employer- provided "telework" incentives, and life could be really different in downtown Los Angeles' Historic Core. Our only comment, it could not come soon enough.
3. Sony is betting on the Internet, and so are others.
Downtown Los Angeles has been home to over 50,000 "gamers, software developers and content providers" for the Annual Electronic Entertainment Expo this week and Sony has caught everyone's attention with their PlayStation 2.
Games, and Internet are converging into a $10B annual industry with 25% annual growth.
4. My company went public and my options have made me rich, what are the tax consequences if I sell some of those option shares?
We have been told by many that Silicon Valley, Seattle, San Diego, and the Washington D.C. area Dot-Com Companies have made many employees millionaires and the taxman's cup is running over.
Is it possible that some of that option stock is IRC Section 1202 Qualified Small Business Stock, we asked someone last week? What is that, was the response. Maybe the difference between a capital gains sale or a deferral under IRC Section 1045, we answered. How so, we were asked? Simple, if you sell IRC Section 1202 Qualified Small Business Stock and reinvest into other Qualified Small Business Stock within 60 days, the capital gains will be deferred. Can that be a newly formed home-based business C Corp.? Yes, was our answer. In short, buy that new home-based business with the Qualified Small Business Stock.
Jim Schneider, LL.M.
The Taxman86 Speaks... is copyright 1998-2010 by James E. Schneider, LL.M. Inc.