Is payment in stock for business considered income?

[jondoe]

Is receiving stock as payment or part payment for a business considered income?

In otherwords lets say I have company ABC worth $2mil. Company XYZ Corp comes along and wants to buy my company(ABC) for $2mil ($1mil in cash $1mil in stock of XYZ Corp). Is the $1mil in XYZ stock I received from XYZ corp for my business considered income?

OR

Lets say XYZ purchased my company and paid all with stock in their corporation, this is all considered taxable income?

If yes, can you provide links to any tax law/code to support this?

 

[davew128]

Is receiving stock as payment or part payment for a business considered income?

In otherwords lets say I have company ABC worth $2mil. Company XYZ Corp comes along and wants to buy my company(ABC) for $2mil ($1mil in cash $1mil in stock of XYZ Corp). Is the $1mil in XYZ stock I received from XYZ corp for my business considered income?

Why would you think it is NOT?

Lets say XYZ purchased my company and paid all with stock in their corporation, this is all considered taxable income?

If yes, can you provide links to any tax law/code to support this?

Google corporate reorganizations and then go back to doing your homework.

 

[TigerD]

Is receiving stock as payment or part payment for a business considered income?

In otherwords lets say I have company ABC worth $2mil. Company XYZ Corp comes along and wants to buy my company(ABC) for $2mil ($1mil in cash $1mil in stock of XYZ Corp). Is the $1mil in XYZ stock I received from XYZ corp for my business considered income?

OR

Lets say XYZ purchased my company and paid all with stock in their corporation, this is all considered taxable income?

If yes, can you provide links to any tax law/code to support this?

Yes. 26 USC § 61 - Gross income defined
(a) General definition
Except as otherwise provided in this subtitle, gross income means all income from whatever source derived... (underlining added)

DC

 

[jondoe]

Why would you think it is NOT?

Google corporate reorganizations and then go back to doing your homework.

Oh I agree Im working on something that IMO divorce attorneys completely missed! I believe someone is hiding massive income NOT disclosed in a prenup out in the open that is being overlooked!! I just want to verify before I step in and call them out on their failure to see this staring them in the face!


So please if anyone has other US code like the one listed by debtcollector or links to IRS pls post

 

[davew128]

I told you what it was: A corporate reorganization. GOOGLE IT. Its NOT INCOME.

 

[tranquility]

I rather agree with both. There is/are more than one aspect here including the issue of the corporation buying and the PERSON selling. I tried to go to what used to be the greatest website ever, (that had all such reorganization issues in a flowchart format) but it seems he charges for the flowcharts now. It was fun in the early days of the interwebs, I learned a lot for free. Still, I didn't review all the free charts to see if one covered the situation.

See also:
http://intltax.typepad.com/
http://www.tax-charts.com/

To see if a free one applies. If so, all your questions will be answered.

 

[jondoe]

I told you what it was: A corporate reorganization. GOOGLE IT. Its NOT INCOME.

relax.... doesnt this (corp reorg) apply to corp ABC holding corp XYZ stock? Im talking about individual receiving and holding stock as payment like any other asset not "his" corp holding the stock. I get where you are coming from but this individual lists stock holding on his personal balance sheet.

 

[anteater]

Maybe that tiny spec of knowledge in corporation taxation has faded to nothingness... But where does reorganization enter in here?

I have a bright idea (admittedly a remote possibility) and start a business based on that idea. Google realizes the brilliance of my idea and offers me $5 million in Google stock for my business. $5 million - my basis = my capital gain.

And I'm just another happy Google shareholder.

 

[davew128]

relax.... doesnt this (corp reorg) apply to corp ABC holding corp XYZ stock?

and to the SHAREHOLDERS.

Im talking about individual receiving and holding stock as payment like any other asset not "his" corp holding the stock. I get where you are coming from but this individual lists stock holding on his personal balance sheet.

You clearly don't understand the concept.

anteater
Maybe that tiny spec of knowledge in corporation taxation has faded to nothingness... But where does reorganization enter in here?

I have a bright idea (admittedly a remote possibility) and start a business based on that idea. Google realizes the brilliance of my idea and offers me $5 million in Google stock for my business. $5 million - my basis = my capital gain.

Receiving stock of Google in exchange for 100% of the stock of the company Google is acquiring as part of a corporate merger is a tax-free corporate re-org. Textbook example actually. Not sure why this is over everyone's heads.

 

[jondoe]

and to the SHAREHOLDERS.

You clearly don't understand the concept.


Receiving stock of Google in exchange for 100% of the stock of the company Google is acquiring as part of a corporate merger is a tax-free corporate re-org. Textbook example actually. Not sure why this is over everyone's heads.

youre pretty adamant about this but it only applies IF this deal was structured as a reorg! Lets consider it wasnt, if this was a straight "Ill buy your company for X dollars and X shares of stock", the stock would be considered income and taxable? If this is true where do I find this info in the IRS tax code.

 

[davew128]

I'm not providing cites for someone to go on a fishing expedition. I'm adamant because I'm right. Stock received in a reorg isn't taxable. It's not optional, it's statutory. Reorgs are defined by tax code not by the parties involved in it. google it.

 

[LdiJ]

I'm not providing cites for someone to go on a fishing expedition. I'm adamant because I'm right. Stock received in a reorg isn't taxable. It's not optional, it's statutory. Reorgs are defined by tax code not by the parties involved in it. Google it.

Dave, I am not going to argue with you about reorganizations, because its been too long since I studied those in my master's program and I haven't been involved in that arena since.

However, I think that you are assuming that the OP's scenario is a reorganization when in fact it might not be...and certainly transactions that combine stock and cash are not necessarily reorganizations. I can personally think of many very high profile buyouts that included cash and some stock in the purchasing corporation that were in no way, shape or form reorganizations, and certainly capital gains or losses applied.

Example: Privately held abc corporation is approached by publicly held xyz corporation. xyz corporation offers a buyout of 600 million with a combination of cash and stock in xyz corporation. abc accepts the offer. We both know that the stockholders of abc corporation paid tax on their gains from that buyout. It was NOT a reorganization. This also happens to be a real life example, I just chose not to identify the actual companies.

 

[jondoe]

I'm not providing cites for someone to go on a fishing expedition. I'm adamant because I'm right. Stock received in a reorg isn't taxable. It's not optional, it's statutory. Reorgs are defined by tax code not by the parties involved in it. Google it

I did google it and is why I made the last post. There is nothing indicating this was a reorg. You for some unknown reason INSIST on coming back to this thread dictating that is the case. So apparently you were present at this business deal and know all the facts so pls in explicit detail go over the entire deal between the two companies...

 

[jondoe]

Dave, I am not going to argue with you about reorganizations, because its been too long since I studied those in my master's program and I haven't been involved in that arena since.

However, I think that you are assuming that the OP's scenario is a reorganization when in fact it might not be...and certainly transactions that combine stock and cash are not necessarily reorganizations. I can personally think of many very high profile buyouts that included cash and some stock in the purchasing corporation that were in no way, shape or form reorganizations, and certainly capital gains or losses applied.

Example: Privately held abc corporation is approached by publicly held xyz corporation. xyz corporation offers a buyout of 600 million with a combination of cash and stock in xyz corporation. abc accepts the offer. We both know that the stockholders of abc corporation paid tax on their gains from that buyout. It was NOT a reorganization. This also happens to be a real life example, I just chose not to identify the actual companies.

You just pretty much said the same scenario I posted! Can you expand on what laws/ codes required ABC to pay tax on their gains?

 

[tranquility]

Receiving stock of Google in exchange for 100% of the stock of the company Google is acquiring as part of a corporate merger is a tax-free corporate re-org. Textbook example actually. Not sure why this is over everyone's heads.

Over "everyone's" heads. Do tell.

Please describe the transaction. Let us have the OP compare and contrast.