Warrants issued to shareholder not treated as “exercised” for Sec. 382 purposes

In PLR 1126002 IRS has privately ruled that warrants issued from a parent corporation to a shareholder as part of an exchange for the shareholder’s stock in the parent won’t be treated as exercised on the date of the exchange under Code Sec. 382(l)(3)(A)(iv) and Reg. § 1.382-4(d)(2). The shareholder also won’t be treated as owning any stock in the parent for purposes of Reg. § 1.382-3(j)(3)’s cash issuance exception immediately before the parent’s subsequent issuance and sale of common stock to independent investors in order to raise capital.

Source: Federal Tax Updates on Checkpoint Newsstand tab 7/13/2011

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The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

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