|
Posted by melissamcfaden on February 29, 2008, 2:04 pm
Please log in for more thread options >
> You are practically asking for the impossible. Here in the U.S. a
> private company is obligated to determine the FMV of stock grants
> and stock options because of FASB pronouncement SFAS 123R and
> Section 409A of the Internal Revenue Code. There is no specific
> method identified in the rules and/or regulations. There are
> guidelines that discuss using similar companies in the same
> industry who are public; any sales of common or preferred stock
> to unrelated parties; internally prepared analyses using
> discounted cash flows; a "safe harbor" by using an unrelated
> third party to prepare the evaluation; a "safe harbor" allowing
> illiquid stock of start-ups to be evaluated in house using a
> certain set of criteria.
>
I am almost certain that that German startup did not follow such
rules... but I will check. BTW, that startup didn't sell anything
yet... zilch. Only small investments from private persons.
> Based on my own experience 25 years ago when I was working in
> Silicon Valley and dealing with lots of start-ups, I can tell you
> that in many cases a stock without any public market and without
> any "readily ascertainable value" was valued at a penny a share
> when it was in the early stages of "start-up." This was a also a
> period of time that had no established guidelines.
You are describing an amazingly similar situation to mine. I am
between a rock and hard place here (I wish I knew better when I signed
that contract with them): On one hand, that German company was pretty
sloppy in their practices (very atypical in that region I would say).
On the other hand, if I declare any value that I wish, I will get in
trouble with the IRS.
What is my best course of action?
>
> You also need to be aware, that this has been a highly litigated
> issue relating to income tax, and estate tax valuation.
>
I read elsewhere that "IRS challenges to valuations tend to be
resolved in courts by the "battle of the credentials"-- so a key issue
is to get someone with excellent credentials to value the shares."
My questions is: How and where do I find "someone with excellent
credentials" that can value the shares in time for my tax preparation?
Any ballpark figures for how much said professional charges?
> My advice is to first contact other employees or contractors who
> worked or who are working for the company in Germany and ask them
> if the company has performed an evaluation consistent with
> German accounting and tax rules. If you fail to obtain any useful
> data in this exercise, you just may have to use one penny.
I like the idea of one penny a share. The question is whether the IRS
will like it, too. Of course, in due time I will have to pay tax on
any gains on these stocks, but then there will be money with which I
can pay...
My question now is: those gains, will they be taxed at a capital gain
rate (most likely LONG TERM because I can't foresee in the near future
any way to sell them)? Or will they be taxed at the regular type of
income rate?
>
> --
> << ------------------------------------------------------- >>
> << 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 atwww.asktax.org. >>
> << Copyright (2007) - All rights reserved. >>
> << ------------------------------------------------------- >>
========================================= MODERATOR'S COMMENT:
Please delete all unnecessary parts of a prior post when responding.
--
<< ------------------------------------------------------- >>
<< 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. >>
<< ------------------------------------------------------- >>
| 
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap