TechHui

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Small Business Bill - No capital gains tax on new shares issued until the end of this calendar year

I was just made aware of this clause in Obama's small business tax bill.  It affects my company's fund raising (in a very positive way), and may affect yours, take a look.  This is a post from a Seattle tech list that I follow and here is a link to more information:

http://www.whitehouse.gov/the-press-office/2010/09/27/background-sm...
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Hi all,

I haven't seen much written on this, but I think it's germane for any startup trying to raise funds through the end of the year:
(disclaimer, I'm not a lawyer or accountant, but I did get a rundown from a senior tax partner at Faegre about this). Obama signed a small business aid bill into law last week; there are a bunch of pieces to it, but one especially interesting for fundraising:

From Sep 27 to the end of the year, any investments made in small businesses will qualify for 0% cap gains treatment on that investment.

OK, almost. Here are the caveats.

1) Gotta be a C Corp, no LLCs
2) Gotta be issuing new shares (not buying already-issued shares)
3) Gotta hold the shares for five years
4) Capped at 10x or $10mm, whichever is less

That said, this is pretty sweet in my opinion -- many expect cap gains to go up over the next few years, making this an even sweeter situation.

My fundraising mnemonic is Vision, Urgency and Greed, this helps U and G nicely while you're raising.

Anyway, I'd suggest a quick look into this if you are currently looking for money.

Best,

Peter

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We are going to encourage all our investors to exercise their warrants before the end of the year to qualify for this benefit - we may even give them a discount to get them to do so.  More cash earlier!

Ken

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Thank you for posting this Ken. I hope some Hawaii tech entrepreneurs are able to take advantage of it. Rob and Chenoa mentioned this bill at the last Hawaii Angels meeting. Hopefully it will spur some of them to invest in businesses like yours.
Hi, Ken. You are correct. The "window of opportunity" until the end of this year involves a recent change to IRC Section 1202. See: http://1202stock.com/modules/news/whoswho.php .
Nice pointer. I particularly like that it was "singed into law" :-)
Hi, Ken.

"Don't try to understand 'em, just rope 'em, roll, and brand 'em..."
Well said Bruce, well said.

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