Find answers, ask questions, and connect with our
community around the world.

Home Forums Startup Investors General – Investors 1202 Tax Benefit

  • Brian

    June 24, 2020 at 9:06 am

    Hi Jignesh,

    The questions I would be asking are:

    1. Is it an equity investment in a C-Corporation? It appears yes – Preferred Equity in NowRx, Inc. (incorporated in Delaware as YouRx, Inc in 2015 per the offering circular)
    2. Are you the original purchaser (not purchased via secondary sales)? Yes
    3. Did you acquire the stock in exchange for cash or property or as payment for a service?
    4. Has the company always had gross assets of $50 million or less?
    5. Are they a qualified business type (basically are they not a hotel, restaurant, financial institution, real estate company, farm, mining company, or business relating to law, engineering, or architecture)?
    6. Do they meet the active business requirement (at least 80% of the assets are used to run the firm, not for investment purposes)?
    7. Was the stock acquired after September 27, 2010 for 100% QSBS?

    Personally, I would keep any of their financials, their offering circular, a copy of their campaign page, pitch deck(s), and anything else I can find at the time of investment as backup.

    Take a look at their assets and financials to see if they meet the 80% test for question 6 as well as the $50M test for question 4.

    Obtaining the answer to question 4 might be a little tricky as it requires confirmation and going through all their past year’s financials (if you can find them); however, given that it looks like their total assets as of December 2018 was only $5.7M, it’s likely that they’ve never exceeded $50M in gross assets in the past, which would disqualify them as Qualified “Small” Business Stock.

    Upon a quick look it would appear they meet most of the checks, but please be sure to check yourself!

    Hope this helps!

Log in to reply.