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Technology Stocks : Seagate Technology - Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Mark Madden who wrote (1197)	11/16/1999 1:37:00 PM
From: Sam	Respond to of 1989

Mark, I'm far from an expert on corporate taxes, but I'm guessing that if HP bought SEG, and then sold the VRTS stock, they would have to pay taxes based on SEG's purchase price, whatever that is. If a non-US based company bought them, though, and then sold the VRTS, I don't think Uncle Sam could get a cut of that sale, though who knows, the way they seem to go after Seagate every few years, they might try. But I can't believe that VRTS's lawyers didn't put in some kind of change of control lockup restrictions on the sale of the position when the deal went through, which would make this line of reasoning irrelevant.

To: Mark Madden who wrote (1197)	11/16/1999 2:00:00 PM
From: Robert Douglas	Read Replies (2) \| Respond to of 1989

Mark, You are correct that there is no taxation on the Veritas until the shares are sold. Unfortunately, if Seagate were to sell the shares they would pay taxes on the gain. The cost basis of the shares is around $25, so at $125 there is a paper gain of $100. Seagate has 60 million shares and an unrealized tax liability of 6 billion dollars. I have tried to check to see what the corporate capital gains rate is but have not reached a definitive conclusion. I know that a few years ago when they dropped the rate on individuals to 20% that there was originally a provision to drop the corporate rate to the same level. I am pretty sure that this proposal never made it out of the House/Senate negotiations. Therefore, I believe that capital gains are taxed at ordinary rates for corporations, around 34%. As for Japan, I don't know what the tax rate is on individuals or corporations. I vaguely remember reading one time that it was very "humane". This was the basis for my speculation that they might be able to sell the shares and collect the entire market value without paying taxes. I am relatively certain that Japan's rates determine the taxes paid and that a foreign company would not be subject to U.S. capital gains rates. Also up for consideration is Seagate being bought by some company that had losses to offset the capital gains taxes. One final X-Files type scenario. A foreign owner buys Seagate, sells off its marketable shares, pockets the cash and sells the disk drive business to management for a song. Things like that aren't in the shareholders best interest, but they still take place.