馃攳
What is QSB stock? | UBS Trending for Wednesday, April 13, 2021 - YouTube
Channel: unknown
[23]
Hi everyone and
[24]
welcome to another pisode of
[25]
UBS trending I'm your host
[27]
Anthony Pastore thanks for
[28]
joining us there are different
[30]
opportunities for investors to
[31]
grow their wealth in ways that
[33]
fit their individual needs one
[35]
tool to consider for this is
[36]
qualified small business stock
[39]
you might be asking what that
[40]
is and joining me now to
[41]
discuss that is Todd Mayo
[42]
senior wealth strategist here
[44]
at UBS Todd nice to have you
[46]
join the show and I know we've
[47]
got a lot of questions to get
[48]
to but I have been reading a
[50]
lot about. Qualified small
[52]
business stock and I thought
[53]
maybe you could start us off by
[55]
talking about what that is to
[56]
the viewers who may not
[57]
understand exactly what we mean
[61]
by qualified small business
[61]
stock. Sure Great to
[64]
join you today- So a qualified
[66]
small business stock in
[67]
Congress back in nineteen
[69]
ninety three- create a
[70]
disincentive. For folks to take
[72]
entrepreneurial risks- and
[75]
started off small and they've
[76]
expanded over time. Now we is
[79]
qualified small business stock.
[80]
Yeah the benefit is you can
[82]
exclude for most people it's up
[84]
to ten million dollars worth of
[85]
gain. Some people can actually
[87]
qualify for more than that- so
[90]
there's some real real benefits
[93]
to taking this this risk.
[94]
Qualified small business stock
[96]
there's both- company level and
[99]
shareholder level. Requirements
[101]
the big ones are at the company
[103]
level it's a C. corporation at
[106]
the time that it issues the
[107]
stock it has to have fifty
[109]
million or less of- gross
[112]
assets- it's going to be
[114]
involved in certain types of
[116]
qualifying. Active businesses-
[119]
and then at the shareholder
[120]
level there's a five year
[122]
holding period. There's
[123]
something called the original
[125]
issue requirement where you
[126]
receive the stock either
[128]
exchange for capital
[129]
contribution that you've made
[130]
to the company or- as
[133]
compensation for services and-
[135]
you've got either be an
[136]
individual or other non
[137]
corporate taxpayer. There's
[139]
other requirements some of them
[140]
get hyper technical but those
[142]
are the those are the-
[143]
requirements. For Q. S. B.
[146]
stock. Great yeah that's a good
[148]
like thirty thousand foot view
[149]
for that thank you Todd so I
[151]
know that you and your
[151]
colleague Brian Hans recently
[152]
wrote an article about how.
[154]
Hedging transactions can spoil
[156]
the benefits of QSB stock.
[158]
How could someone lose those
[162]
benefits using a hedging
[162]
transaction. Yeah these there's
[165]
certainly there's for
[166]
for some people this natural
[168]
desire to once they've
[169]
experienced this big
[171]
appreciation in the value of
[173]
the stock to try to protect
[174]
that. That gain and for some.
[178]
Particularly for directors and
[179]
officers of some companies
[181]
they're gonna be kind of
[182]
protected from that because the
[183]
companies may have an anti
[185]
hedging a policy in place. But
[187]
for others you know there's
[188]
this risk existence they may
[189]
try to- pursue one of the
[191]
strategies- what happens is if
[194]
you have what the code the tax
[196]
code calls an offsetting
[198]
short position. With respect to
[200]
your QSB stock- you lose
[203]
that exclusion you lose it
[205]
entirely- and the tax law
[209]
gives us some guidance on with
[210]
that but- we don't have a lot-
[212]
so we know for example- selling
[215]
short. Are substantially
[217]
identical property- to
[219]
acquiring an option to sell
[221]
substantially identical-
[223]
property or even writing a
[225]
call option where the other
[227]
side made- more likely than
[229]
not- exercise the right to
[232]
buy- those are all situations
[234]
where you get into this.
[235]
Offsetting short position that
[237]
can spoil the tax benefits now
[241]
there鈥檚 some planning
[242]
opportunities that exist but-
[244]
that's the that's the default-
[247]
result. As you just completely
[253]
lose the exclusion. What you
[254]
know so we're sitting in middle
[255]
of tax time and especially with
[257]
the extended may seventeenth
[259]
deadline folks may still be
[260]
thinking about it are there any
[261]
other. Tax issues that the
[263]
shareholders should consider
[266]
especially when making their
[266]
elections. Yes so the you know
[270]
one thing that the shareholder
[271]
can do is there
[272]
there is this ability to make
[275]
an election to have a which
[277]
essentially it deems sale at
[278]
the time of the create the
[280]
offsetting. Short position so
[282]
if they do that they will
[284]
continue to have the ability to
[286]
exclude the gain so long as
[288]
they held the shares for that
[291]
five year period- they'll make
[293]
that election of taking-
[295]
recognize the gain but get the
[297]
benefit of the- the exclusion.
[299]
Now the follow on the
[300]
implications that you're
[302]
talking about is you know. The
[304]
shareholders should think about
[306]
what are the- following.
[309]
Considerations for example yeah
[311]
we don't have any direct
[312]
guidance are authority on this
[314]
but making that election for
[317]
the deem sale probably resets
[319]
the holding period for that
[320]
stock. And so now depending on
[323]
the type of transaction that
[325]
the shareholder entered into
[327]
maybe that holding period can't
[329]
mature into a long term. And so
[331]
you're stuck with short term
[333]
and you may end up having a
[334]
situation where you're going to
[335]
be- subject to short term- tax
[339]
rates rather long term tax
[340]
rates- and obviously that may
[342]
put you a higher tax situation
[347]
Accentuation so those are the
[348]
right contact on and as- right
[351]
exactly and as we always say
[353]
when we're any kind of wealth
[354]
planning items that we
[356]
don't actually give tax advice
[357]
at UBS to make sure to talk to
[359]
a tax professional or your
[360]
accountant for more
[361]
information- and you know Todd
[363]
just continuing really quickly
[365]
if a shareholder does hedge.
[366]
Q. S. B. stock and doesn't does
[368]
not make the election are there
[370]
any implications for the family
[373]
members of the shareholder. Yes
[375]
it mean that the- any related
[377]
person also ends up losing the
[380]
exclusion. And in fact. Some
[382]
shareholders will do is they'll
[384]
go through and employ what we
[385]
call stacking- strategies
[388]
where they look to multiply the
[390]
exclusion- primarily through
[392]
the use of trusts that are
[394]
themselves treated as their own
[395]
taxpayers. And so if you know I
[397]
have- QSB shares. Enter into an
[401]
offsetting a short position.
[403]
Don't make the election not
[405]
only do I spoil it for myself I
[406]
spoil it from my parents my
[407]
siblings my children. And I
[409]
also can spoil it for these
[410]
trusts that I've set up to do
[412]
to take advantage. Of the
[415]
stacking techniques. It was
[416]
really good know Todd thank you
[417]
so much I know that there
[418]
probably is a you know a good
[420]
amount of people out there who
[421]
have a lot of questions about
[422]
Q. S. B. stock. The thanks for
[423]
sitting with us today in
[424]
explaining of what what that is
[425]
and all the nuances by the way
[427]
I love your background it looks
[428]
kind of like you sitting in
[429]
front of a- of a van Gogh
[430]
painting which is a pretty cool
[433]
actively. Thank you. That any
[437]
anytime it's the day of virtual
[439]
of you know backgrounds and I
[440]
know yours is actually a real
[442]
one so it's pretty impressive
[443]
Todd thank you very much Todd
[444]
Mayo senior wealth strategist
[446]
UBS that's- thank Todd. UBS's on
[451]
social media everybody you can
[453]
follow us on linkedin Instagram
[454]
Twitter and Facebook where
[455]
you'll find time the content
[457]
from our best thinkers and
[458]
intellectual capital that can
[460]
help you make more informed
[461]
investment decisions now as we
[462]
said UBS does not provide tax
[464]
advice to make sure to talk to
[466]
a tax professional if you have
[468]
any questions and as always
[470]
when it comes to your portfolio
[472]
speak with your financial
[473]
adviser thanks for joining us
[474]
today everybody don't forget to
[475]
check out our other episodes on
[477]
demand of UBS trending which
[480]
can be found on our website.
[482]
UBS dot com forward slash
[483]
studios as well as the UBS
[484]
channel on YouTube until next
[486]
time I'm Anthony Pastore have a
[487]
great day and remember to keep
[489]
your eyes on what's trending
[491]
See you soon.
Most Recent Videos:
You can go back to the homepage right here: Homepage