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Technology Stocks : The New QLogic (ANCR)

QLGC 16.07

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Aug 24 5:00 PM EST

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To: Greg Hull who wrote (23762)	8/17/1999 11:38:00 AM
From: Steve Landrum	Read Replies (1) of 29386

Greg, Regarding the accounting / tax treatment for the sun warrants. First, It is not entirely clear whether the discount from sales due to the sun warrants will be deductible for tax purposes. I presented this question to two different people in the tax department where I am employed. Unfortunately, I received two different answers. One person (a tax attorney) believed that the discount would be deductible for tax. His reasoning was similar to employee stock options issued "at the money". When exercised the company deducts the spread(for tax, not book). The other person I asked (masters in taxation)believed that the deduction would be disallowed under the argument that a company cannot recognize gains/losses resulting from transactions in their own stock. Both responses were "off the cuff" after I presented the general terms of the warrant agreement. [I was tempted to hire them to research the issue :>)] Even if ancor does not get a tax deduction, the financial accounting treatment should allow us to determine how sun sales are ramping, as well as the percentage of sun vs. other oem revenues. Steve

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