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Sohodojo Advisory Board Member
Jim Schneider
The Taxman86 Speaks...
28 April 2000
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We have survived; Digital Divide, what is it, and where does it begin; Capital and where to find it.

1. We are in the New Economy, a.k.a. high speed computers, high speed internet, and a web site. HELP!!!!

Several days ago we decided to upgrade to the iMacDV400Mhz [it is the greatest], our digital camera is coming next; and today we are here to talk about the experience, which was pretty interesting to say the least [our computer guru from Boulder, Colorado was here to help us through the experience]. We now have three generations of Macs, pre Power Mac, a Power Mac, and now the iMacDV, and the beat goes on. Getting DSL for two computers vs. one is now our greatest challenge, but at least we have PacBell close by (three miles or less) in our Urban Environment, which is not the case in the suburbs, to say the least.

Last summer Distressed Communities were high on the President's Agenda, and in the fall the Speaker of the House and President Clinton made a deal to have bi-partisan Distressed Communities. Where are we today?

The President, Mr. Greenspan and others are talking about Distressed Communities and Digital Divide, meanwhile the economy is in overdrive and heating up so interest rates are going up a one-half percent (1/2%) says the New York Times.

Everyone is talking about it but what are they doing about it? Internet Equality in Town and Country.

A Clinton Download.

On the Road, Clinton Stresses Rural Internet Access.

All of the above is courtesy of The Industry Standard's: Media Grok Weekly Newsletter--it is great.

Is it possible that the Distressed Communities Legislation is stalled out? Not really, it is just photo-op time. The House is back next week and we believe that the Republican Leadership will be true to their word and that a bill will be passed by the middle of the month; and maybe it might include a change to IRC Section 1045 [Qualified Small Business Stock] to allow non-corporate owners of Enterprise Zone Businesses the same advantages of non- corporate owners of Qualified Small Business Stock, to wit, an Enterprise Zone Business can be sold after a six months holding period, and all capital gains will be deferred if reinvested within 60 days into another Enterprise Zone Business. Now that could energize a few [126] Empowerment Zones/Enterprise Communities. It is called the BIG BANG THEORY.

3. Capital, capital, where to find it?

We have mentioned many times that the SEC and the SBA have attempted to make it easier for small business to raise capital and that one such program is the Small Corporate Offering Registration [SCOR] for those that need one million dollars or less [$1M]. Recently we dealt with the California Department of Corporations regarding such registrations, and they were very helpful to say the least. In fact within 24 hours we got a complete package with an interesting cover letter 18 pages with some real gems on pages 14/15. IF a SCOR Offering is limited to certain investors then it can generally get qualified sooner than later [two to three weeks maximum in most cases, and two to three days in some cases] with very few limitations on the terms of the offering.

What are those magic limitations on the type of investors, they are:

  • 1) $50,000 Gross Income and $75,000 Liguid Net Worth [per couple if married]; or
  • 2) $150,000 of Liquid Net Worth [per couple if married]; or
  • 3) No more than $2,500 to anyone not covered by 1 or 2 above.

Needless to say, California is generally a tough state to register securities in, and based on the above, they are pretty generous. If raising $1M or less is target we strongly consider this program. For more information check out: one of many articles on the subject. What is interesting with a SCOR Registration is the ability to freely trade the issued shares without a later registration if you are not an "insider," as defined. However, given the limitation of $1M and most stock being offered in the $1 to $5 range, there would not be a big after-market to say the least, but being freely tradable is a big advantage.

What if those shares of common stock were in a Qualified Business under IRC Section 1202, and thus subject to IRC Section 1045? What if they were in an Enterprise Zone Business and that business was in a Community Renewal Zone? and not subject to any tax after five [5] years, or further subject to IRC Section 1045, as proposed. Would that make the Offering Document more interesting?

Jim Schneider, LL.M.
Taxman86

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