Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : Cadus Pharmaceutical Corp. (KDUS) -- Ignore unavailable to you. Want to Upgrade?

To: peter michaelson who wrote (246)	9/10/2000 7:45:53 PM
From: N/E PATSFAN	Respond to of 1833

[NOLC] I would bet that they wrote off the escrow as an extraordinary item (conservative acctg expecting to loose) but carried it on the books as a deferred asset if they were to win an realize a taxable gain at some future date. They would now have to treat those expensed $ as taxable but still have the NOLC to offset this new income. Problem seems to be that they may not be able to use all the NOLC as reported due to change in ownership. Sounds like they have been offsetting the NOLC anticipating a change in ownership or as ownership %'s increased. This is too bad as the NOLC would protect the litigation earnings and/or make it possible to merge with a profitable entity and protect that entity's taxable earnings. Of course this is just my spec and they may still be able to utilize enough of the NOLC to the shell's benefit. Just my take, NEPF

To: peter michaelson who wrote (246)	9/11/2000 4:20:18 PM
From: RCMac	Read Replies (1) \| Respond to of 1833

>> is there any way for a distribution to be made without being taxable to the individual stockholder? Seems to me I have heard of dissolutions, with distribution of all assets to the owners, as being a non-taxable event.<< and from post #240: >> However, would there not be an awful tax hit to the individual if cash were to be distributed out? << Peter, If KDUS's cash were distributed to its shareholders, it would be taxed in the following fairly benign way: Because the company has no "earnings and profits", the cash would not be treated as a "dividend" (ordinary income rates, up to 39.6% Federal). Instead, it would be treated (a) as a tax-free return of capital, up to the amount of the shareholder’s tax basis in the shares, and (b) as a capital gain (short-term, taxed like ordinary income, up to 39.6% Federal tax; long-term, i.e., held more than a year, maximum Federal tax 20%) above the tax basis. Receipt of the returned capital would reduce your tax basis in your shares. Or if the company were dissolved and its assets, including its cash, distributed to shareholders in exchange for their shares, the cash and property would be treated the same way. It would not be tax-free. Dissolution would be daft, of course: we’d each end up with a proportionate share of the IP, databases, the “collection of over 25,000 proprietary yeast strains, human and mammalian cell lines, and genetic engineering tools “ etc. – unworkable. The distribution of the cash would at least be feasible -- it leaves the future royalties in the corporation for later distribution, if and when they come in, and leaves the licensable IP there for the licensing -- but I’d prefer the cash stay in the company and be used as part of the attraction for a deal with someone that makes something of the undervalued other assets. (Assuming someone gets it together, takes Rick's or someone else's advice, and pursues such a deal.) Pending such a deal, the cash will sit earning interest at probably 5 3/4%, tax-free because of the NOLCF. -- RCM