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Posted by Gil Faver on February 18, 2008, 6:14 pm
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>
>>a small sportsman's organization (a corporation) redeemed some of its
>>shares last year and is holding them as treasury shares. When these
>>shares are sold to new members at a higher price than their redemption, is
>>the "extra" money treated as profit or an increase in the capitalization
>>of the corporation?
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> not as "profit" to the business. It is however, an increase in capital,
> specifically called "additional paid in capital" - which is the amount
> received above the stated face amount of each share. So, if the face on
> the share is $100, and they sell for $150, then you book stock at $100 and
> APIC of $50. Hopefully you get cash, and the corresponding increase in
> cash is $150.
Thanks Paul. That is what I was thinking.
Now, for a twist: What about the case where a departing member sells his
share (through the corporation) to a new member (who has passed the
corporations vetting process) and the corporation keeps, say, 10% of the
sales price? Is that 10% income of some sort, or APIC?
thanks.
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