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Author: AEP Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121316  
Subject: Re-incorporation to Bermuda Questions Date: 2/20/2002 5:00 PM
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To the more experienced folks-

I recently discovered that Stanley Works (SWK) is planning to change its' corporation status from the US to Bermuda, pending shareholder approval. (No current SWK board on the fool)

Today's Hartford Courant newspaper (2/20/2002), Business Section ran an article about this prospect and noted some interesting issues that such a change could bring about for the company's shareholders.

1. The stock change over (SWK is suppose to exchange on a 1 for 1 basis) could lead some shareholders into a capital gain or loss situation for shares held in taxiable accts, depending on their basis.

2. The article also pointed out that the (US) Federal tax law imposes a one-time charge (known as a "Toll Charge") on such re-incorporation moves. The amount of the Toll Charge is based on how much the stock has appreciated since it was purchased by the shareholders. The newspaper article states that "the Toll Charge is paid by the shareholders and based on the capital gains, if any, from the time they purchased the company's stock."

Q1 Is it therefore true that the stockholder incurrs two finanical hits at the time of the re-incorporation stock exchange: (assuming a gain has occurred) - A capital gain tax, and the Toll Charge?

Q2. Are there any other negative impacts for the stockholder when a company does this incorporation change?

Q3. Is the Bermuda re-incorporated company considered a full-blown foreign company? Does this event trigger additional (US) IRS reporting of income from a foreign company, or ownership of stock in foreign interests by US citizens?

Q4. Where can I find more info about the Toll Charge, and if applicable, how to file, and calculate it?

Q5. Are there any Bermuda income tax (or other) filings that a shareholder in a re-incorporated company will have to do?

Q6 Does the Bermuda re-incorporated company get around the US reporting standards and requirements?

Thanks in advance,
AEP

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