Replies to post #20575 on General European Strategic Invt's Inc (GESI)

[Flat Foot]

Get those cheapies while the Outstanding Shares continue RISE!!

[Klinsmann]

This is a great DD post, tone7ate9!!!

Should be added to the ibox imo

[integral]

FREE Financing? If everything is FREE, why do you need financing? $50 million just fell from the sky? Money for nothing and the chicks for free?

If the ATM machine gave you an extra $20, you are obligated to return it. It is a crime not to. It is the way the laws are written. Money is not free.

And purchasing shares at $0.005 when it is valued at fair market value at $0.02, one has a cost basis of $0.005 and stock based compensation of $0.015 per share. That has to be categorized as income, and paid on phantom income to the IRS. When it is sold years later, the taxpayer classifies the difference as a capital loss or capital gain based on the $0.02 not the $0.005 basis. The IRS classifies the purchaser as purchasing the shares at $0.005 and then receives income of the $0.015. Then it classifies the purchaser as purchasing the shares again at $0.02. This is the new cost basis, the purchaser has to report the capital gain/loss along with income. They are categorized differently.

The $0.015 is income, the sale shows up in a different tax year. If it is a loss, it cannot offset the income, except for $3000. If it is a gain, as in the stock is sold at $0.03, the taxpayer pays $0.015 in income and $0.01 in long term capital gains (because it is restricted paper). The issuer (GESI) was to issue 1099's to each purchaser of the difference subsequent to its expense of the loss on the P&L. The issuer was to submit to the IRS Form 1096 for each as well. The fine ranges from $100 to $250 per instance based on how the IRS determines if it was a mistake or intentional.

The taxpayer is obligated to report the income irrespective of the 1099.

This law really stinks to high heaven. In 2000 when the .com bubble burst and killed the market, many middle level managers that got laid off paid dearly in phantom and passive income taxes on stock based compensation that became wall paper. Congress has yet to fix this. But for now, all the purchasers in the PPM in June of 2012 have a 2012 taxable liability. Unfortunately, that list has already been submitted to the IRS. Currently, the IRS is two years behind. So I expect in June of 2014, certified letters will be showing up.