Are you saying that in the event RMKL were to double, a conservative short term return, I hope, taxes would exceed the amount of the increase to the shareholders?
If you really have that type of tax regime, I am beginning to understand your disdain for your government.
I don't know Canadian tax rules, but assuming a 50% estate tax, here's some rough math on the 2 scenarios of holding the stock vs. selling it like they did:
Holding
Assuming a .20 stock price at passing and .40 later on:
20 million shares X .20 = $4 million of stock in estate
Estate tax = $2 million (could be much higher after listing if stock moves up)
Forced to sell half RMKL to pay estate taxes (pressuring stock after listing), plus more to pay income taxes on gain (depends on cost basis of shares)
RMKL doubles to .40
< 10 million shares left X .40 = < $4 mill in stock left, $2 million estate tax + possibly big income taxes paid
Selling and gifting shares cheap before listing
sell 8.5 mill. X .105 = 43% of holdings, get 890k
11.5 mill. X .105 = $1.2 million in stock gifted to offspring
Estate tax = $600k, can be paid out of RMKL sale proceeds, any gift tax paid out of sale proceeds, too
RMKL goes to .40
11.5 mill. X .40 = $4.6 mill in stock left, no estate tax and little or no income taxes paid (depends on cost basis of shares)
Depending on the income taxes they'd have to pay, it looks like they could end up with significantly more shares and $$ by doing the estate transaction they did before listing rather than doing it after listing and at a much higher price. They probably would have been forced to sell significantly more shares to pay taxes if they hadn't done this transaction.
I think in the long run, doing it the way they did before the listing, and before the stock gets more market exposure, will be better for RMKL shareholders than if they'd waited until after listing. It also allows the people who buy the shares from them to get them at a much better price than if they'd waited until after listing, so they did some shareholders a big favor. |
