#equity-instruments
Understanding stock, SAFE notes, convertible notes, and startup financing structures
Section 1041 lets spouses transfer property tax-free during and after divorce, but carryover basis, the six-year window, QDROs, ISO conversions, and post-TCJA alimony rules quietly reshape every settlement. A working guide to what must be fixed before the decree is signed.
An F reorganization under IRC Section 368(a)(1)(F) lets an S corporation restructure tax-free into a holding-company/QSub form so a buyer gets an asset basis step-up at any ownership percentage and sellers can defer tax on rollover equity.
Form 1099-B Box 1e shows your broker's cost basis, but Box 5 determines whether the IRS sees it. A working guide to covered vs. noncovered securities, Form 8949 adjustment codes (B, W, Q, O, T), and the RSU/ESPP basis corrections that prevent double-taxation.
The OBBBA raised the Section 1202 QSBS cap to $15 million, lifted the gross-asset ceiling to $75 million, and replaced the five-year cliff with a tiered 50/75/100 percent exclusion at three, four, and five years — but only for stock issued after July 4, 2025.
Opening Balance Equity is a temporary account that should read $0.00 once setup is done. Learn what it means, how to set up books mid-year from a trial
Owner's equity is Assets minus Liabilities — the running total of contributions, draws, profit, and losses. This guide structures equity accounts for sole proprietors, partnerships, and LLCs, explains why draws are not expenses, and shows the year-end closing entries that keep a balance sheet in balance.
A practical guide to ASC 820 fair value measurements for private companies, funds, and CFOs—how to classify Level 1, 2, and 3 inputs, build defensible Level 3 valuations for private equity stakes and earn-outs, write disclosures auditors accept, and survive scrutiny of unobservable assumptions.
Section 409A taxes noncompliant deferred compensation in the year of vesting and adds a flat 20% federal penalty plus interest. This guide explains the short-term deferral and separation pay exceptions, the six recognized payout triggers, the six-month delay for specified employees, and how to structure bonuses, severance, RSUs, phantom stock, and discounted stock options so founders avoid the penalty.
A Section 83(b) election lets founders and early employees pay ordinary income tax today on the full value of restricted stock instead of at each vest. Filed within 30 days on IRS Form 15620, it can convert millions of phantom ordinary income into long-term capital gain and start the QSBS holding clock on day one.
A practical guide to Section 302 stock redemptions in closely-held C corporations — when a buyback gets capital gain treatment versus dividend treatment, how Section 318 family attribution disqualifies most family redemptions, and how the four 302(b) tests plus the 302(c)(2) waiver preserve sale treatment.
Section 302 of the Internal Revenue Code decides whether a closely-held C corporation's stock redemption is taxed as a capital sale or a full-amount dividend. This guide explains the three Section 302(b) tests, the Section 318 attribution traps that ensnare family-owned companies, the 10-year family-attribution waiver, and the partial-liquidation safe harbor under Section 302(b)(4).
Section 382 caps a startup's pre-ownership-change net operating loss deductions at the pre-change fair market value multiplied by the long-term tax-exempt rate (about 3.56 percent in February 2026), triggered when 5 percent shareholders collectively gain more than 50 percentage points over a rolling three-year testing period.
