Baker Tax Blog

Let’s say it’s March 2024 and you have some stock options you would like to grant members of your team.  You’ve heard that you can rely on a tax code Section 409A valuation for up to 12 months.  You received a valuation of $0.30 per share effective as of December 31,...

Updated August 20, 2024 Certain recent changes to tax code Section 174 may negatively affect companies that have research and development (R&D) expenses. Here’s the basic problem: If in 2023 you spent $1M to make $1.2M then you have $200K of profit.  If we lived...

Let's say you have some intellectual property (IP) that you'd like to give to a corporation in exchange for shares of its common stock.  The IP and stock are both worth $10,000 and you have tax basis in the IP of $800. Normally such an exchange would trigger $9,200 of...

It's 1099 season. For those of you who paid a law firm for legal services this year, here are three tips: 1. Payment for legal services goes in box 1 of Form 1099-NEC. Do not use Form 1099-MISC. Form 1099-MISC box 10 "Gross proceeds paid to any attorney" is for when...

Let's say you're the majority shareholder of ABC, Inc., a C corporation, which just sold substantially all of its assets in a taxable asset sale.  The deal consideration consists of three parts (i) $30M to be paid at closing, (ii) $3M which is being held back in an...

Updated. Originally posted September 14, 2019. Once there was a beautiful tech incubator named Y Combinator. In a dream one night she saw herself curing every start-up’s funding woes with a magical new creature called a SAFE. When she woke up, she got to work creating...

So, your company is being sold and you want to know whether you should exercise your stock options prior to closing.  First you should confirm whether the transaction agreement (i.e., stock purchase agreement, asset purchase agreement, or merger agreement) provides...

For tax purposes, there are three types of equity that can be issued in a partnership or an LLC taxed as a partnership: capital interests, profits interests, and carried interests. Knowing what type of interest you own or are being granted is important, because there...

 So, you started a business and you issued a convertible note. You know, a loan that can be repaid with the equity of your start-up. The date of the note conversion has arrived and you’re busy calculating how many shares you need to issue when suddenly you get an...

A parachute payment, in plain English, is a payment made to an executive when a company is sold, to help him or her land softly. A parachute payment, in tax speak, is more complicated. But here’s the gist: In the 1980’s Congress reacted to the public’s perennial...

I occasionally get asked whether it is possible to transfer a stock option. Listed below are relevant considerations.  Does the plan allow for it?  Carefully read the stock option plan and agreement to see if there are any restrictions on option transfer. There...

What do you do, when you receive a 409A valuation for your company that is lower than the exercise price of previously granted stock options? A few years ago I read an article titled, We Spend Too Much Time Celebrating "Start Ups" and Not Enough Time Celebrating "Keep...