Conversion Solutions Holdings (fka CSHD)

[Valis]

http://www.legalandcompliance.com/reversemergers.html


Tax Implications & Initial Share Price


Almost all Reverse Mergers take advantage of the tax free, stock-for-stock reorganization provision of the Internal Revenue code. Capital gains tax is paid when the individual shareholder sells the stock in the public stock market (usually after the minimum one year holding period for control persons). That is, the shareholders of the newly merged company do not recognize a capital gain until after they sell the stock, even though the stock may have a much greater value after the merger is complete. The timing of the stock sales can be determined by each individual investor to suit their investment or tax consequences.


Once a Reverse Merger is completed, a broker/dealer must decide to make a public market in the stock. The market makers, in conjunction with the company, can determine the initial price for the stock. Perceived value, track record and potential growth of the company usually have more to do with initial pricing than earnings multiples and current book values. Competent investor relations and supportive market makers as well as management's ability to relate the company's potential to investors are of key importance. Ultimately, the public market acceptance of the company will determine the market price for the stock.


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The Merger qualifies as a tax-free reorganization under Section 368 of the Internal Revenue Code of 1986, as amended, meaning that as the Reorganized Holdings Corporation begins to trade it has an option to adjust the market (trading price) to reflect the new Reorganized Holdings Corporations audited financials as it reflects on the per share book value.