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Sohodojo Advisory Board Member
Jim Schneider
The Taxman86 Speaks...
30 June 2000
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A friend does well; Look mom I got the music, film, or new media; Legislation is coming.

1. Another San Diego Startup does well.

The headline on the front page of today's San Diego Union Tribune, not available online, says it all, startups can do well for their employee shareholders, end of story. See it online. Now the fun begins for the financial planners, come one, come all for the various stock options, etc. Have we suggested that IRC Section 1045 is the key to success; well this is a clear example of the possibilities, especially since the IRC Section 1045 taint tracts into the stock received in a "tax free merger." In this case it is $475M of Texas Instrument's common stock. It looks like another venture capital group could be forming, looking for other IRC Section 1045 companies.

IF that San Diego Company had been located in an Empowerment Zone and/Enterprise Community and the investors had Empowerment Zone and/or Enterprise Community Investments under proposed IRC Section 1397B they could sell their investment stock and reinvest it another Empowerment Zone and/or Enterprise Community Investment, which could be commercial real estate or cash, if you will.

2. The New York Times says it all, the entertainment industry, Southern California's largest, as we know it, is over.

When Peter Lewis says it is over, on the front page of yesterday's N.Y. Times Circuits Section, it is over. People will be getting their highspeed internet entertainment by wireless, see above, sooner then later, and it will look like a radio/t.v. all rolled into one portable device. The college/high school/middle school students have won out says Peter Lewis. The L.A Times is basically saying the same thing, file swapping is in.

The business models will have to start changing and when they do, the businesses will be located where it is the least expensive tax wise, which means that tax free states like Nevada will start attracting the entertainment companies of the future, all of whom will be selling over the Internet. You heard that here first.

3. Congress will be busy over the next month.

Pension reform, death tax reform [it will be on the Senate Floor the week of July 10th], marriage penalty, and distressed communities are coming down the pipe line. Pensions are the sleeper because larger contributions for those over 50 are hidden in the package. The boomers have friends in high places.

Jim Schneider, LL.M.

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