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Author: TMFGebinr Big gold star, 5000 posts Top Recommended Fools Old School Fool Supernova Phoenix 1
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Subject: Rollover of Gain question -- Pub 550 Date: 4/18/2009 12:56 AM
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Hi,

Over on the Stock Advisor Netflix board, a question has arisen about the wash sale rule and whether there is or is not a provision for protecting gains. One subscriber described selling Netflix shares at a gain and then a few days later, buying even more shares at a lower price. Another subscriber quotes Pub 550 saying that those gains are protected (and that this is the flip side of the wash sale rule). We understand the wash sale rule; that's not the question.

Here's the link: http://www.irs.gov/publications/p550/ch04.html#en_US_publink... and here's the quote:

"You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain.
...
During the 60-day period beginning on the date of the sale, you buy replacement property. This replacement property must be either common stock or a partnership interest in a specialized small business investment company (SSBIC). This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993." (emphasis added)


The question arises from the words "common stock" (bolded above). The second subscriber seems to be claiming that any common stock would qualify. Therefore, the repurchase of Netflix shares would qualify and the gain realized from the original sale is protected.

I believe that it is only the common stock of (or a partnership interest in) the SSBIC which qualifies, therefore, the realized gain is taxable and not protected.

Could you please tell me if either one of us is correct and who that may be?

Thanks,
Jim
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Author: Hohum77 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105819 of 121144
Subject: Re: Rollover of Gain question -- Pub 550 Date: 4/18/2009 1:09 AM
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I believe that it is only the common stock of (or a partnership interest in) the SSBIC which qualifies, therefore, the realized gain is taxable and not protected.

Not a tax pro, but I interpret it the same way as you do i.e. this pertains only to SSBICs.




Hohum

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105820 of 121144
Subject: Re: Rollover of Gain question -- Pub 550 Date: 4/18/2009 8:39 AM
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believe that it is only the common stock of (or a partnership interest in) the SSBIC which qualifies, therefore, the realized gain is taxable and not protected.

You are correct. The whole point of the law is to encourage investment in small businesses.

Phil

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Author: stockmover Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105826 of 121144
Subject: Re: Rollover of Gain question -- Pub 550 Date: 4/19/2009 5:16 PM
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Hi everyone,

believe that it is only the common stock of (or a partnership interest in) the SSBIC which qualifies, therefore, the realized gain is taxable and not protected.

You are correct. The whole point of the law is to encourage investment in small businesses.<b/>

How can I tell if a specific stock qualifies within the SSBIC category? Do I have to read the company's 10K or is there a faster and/or better way to find out? Thanks

TG


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Author: Hohum77 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105830 of 121144
Subject: Re: Rollover of Gain question -- Pub 550 Date: 4/19/2009 8:20 PM
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How can I tell if a specific stock qualifies within the SSBIC category? Do I have to read the company's 10K or is there a faster and/or better way to find out? Thanks

TG


I Googled...that's fast!

As far as I can tell, there was only one publicly traded
SSBIC thru 1999. It was called Freshstart Ventures (FSVC)

http://www.mdtaxes.com/news1099.html

I couldn't find it on a stock search.


Hohum

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Author: stockmover Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105836 of 121144
Subject: Re: Rollover of Gain question -- Pub 550 Date: 4/19/2009 11:51 PM
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Thanks Hohum ... I just wanted to make sure that I didn't have a stock in my portfolio that may have qualified for this deferral of gains.

TG

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Author: Hohum77 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105838 of 121144
Subject: Re: Rollover of Gain question -- Pub 550 Date: 4/20/2009 4:07 AM
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Thanks Hohum ... I just wanted to make sure that I didn't have a stock in my portfolio that may have qualified for this deferral of gains.

TG



BTW, another Google link had a more recent count, and the total number of
SSBICs was around 100 (in 2007) & no mention of publicly traded ones.


Our old friend, Freshstart Ventures? They merged with Medallion, a Publicly traded Business Development Company (BDC) (symbol: TAXI)

http://www.allbusiness.com/banking-finance/financial-markets...


Yup, they still finance taxi-cabs
http://www.medallionfinancial.com/about_subsidiaries_freshst...


Hohum

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