A group offered to buy my stock for $1.00. How are you different?

Our goals are to establish for the seller a definitive date and value for the asset divestiture and to provide a bulletproof process and documentation to withstand a tax audit.  We take steps to reduce risk that the IRS will object to the form of the divestiture.  Here is how we are different:

  • We establish negotiated pricing for each individual transaction.  According to our legal and accounting advisors, buying stock from everyone at the same $1.00 price does not really establish an arm’s-length, negotiated sale. It has the characteristics of a service, not a sale for fair negotiated market price.
  • We purchase other types of assets, such as notes, LLC memberships, distressed real estate, including international assets.
  • We correspond with the Issuer company to handle restrictive rights contained in most private stock purchase agreements, such as right-of-first-refusal, co-sale rights, and other transfer limitations. Our Asset Transfer Agreement gets the seller out of the transaction and gives us (as the buyer) the limited power of attorney to deal with the restrictive rights constraining the seller.  We take responsibility for following up on all these, to ensure the transaction is completed.
  • We support customers in case of an IRS audit.
  • To make the selling process easy and fast for the seller, we handle most of the transaction electronically (via email and DocuSign).  We also send FedEx labels, so sellers who have possession of their stock certificates can send them to us easily.

What is the worst case for not using CapGain Solutions

One bad scenario is you sell your private stock to your lawyer, friend, back office firm or brother-in-law.  The IRS audits the transaction a couple of years later and says the sale was not an arms length, non related party transaction. They also determine that the private stock was worthless the year before you did your transaction.  The year in which the stock because worthless in is beyond the statue of limitations for amending your return. In that case, you many lose the use of the capital loss forever! Now that is bad — a good reason to use CapGain Solutions for sure!

How is CapGain Solutions related to ZAH, LLC?

ZAH stands for Zombie Apocalypse Holdings. Zombie Apocalypse Holdings, LLC is the legal name of CapGain Solutions. CapGain Solutions is its dba (doing business as) designation.  We called the company Zombie Apocalypse Holdings because we help investors get rid of the “living dead.”

What type of assets will you purchase? Are there any assets you will not purchase?

Typical purchases include the following:

  • Preferred stock in private companies
  • Common stock in private companies
  • Warrants to purchase common or preferred stock in private companies
  • Stock in public companies that no longer trade on established exchanges
  • Membership interests in LLCs and LP and GP partnership interests
  • Other assets as promissory notes, real estate, LLC interests with securities or real estate as underlying assets, operating assets, intellectual property, etc.

We typically do not purchase precious gems, jewelry, fine art, capital equipment, residential real estate, or most other hard assets. However, contact us to discuss your unique situation.

Why is selling to CapGain Solutions better than selling to my brother-in-law or lawyer for $1.00?

Are such transactions really “negotiated”, arms-length sales? We provide a valid asset purchase agreement you can use to demonstrate an arm’s-length sale, a “true sale” with no suspicion or appearance of buy-back rights. Our documentation can be especially important if you have a requirement for audited financial statements.

We will attend tax authority meetings – will your brother-in-law? Will your brother-in-law truly complete the purchase of an asset having right-of-first-refusal or co-sale restrictions? Will he be an acceptable buyer to the Company?  Will he warrant that he is an accredited investor?

Our online process saves you time and hassle.  You can avoid spending money on attorney’s fees, too.

What is wrong with simply telling my accountant the asset is worth nothing?

The IRS has specific regulations about how to write off worthless securities.  See Code of Federal Regulations – Title 26: Internal Revenue: 26 CFR 1.165-5 – Worthless securities.

A loss must be “realized” to be “recognized” and recognized when it is realized. The loss deduction for worthless securities must be taken for the tax year in which the  securities became worthless. How do you prove it is worthless and became worthless in the current taxable year?  Selling your “worthless asset” to CapGain Solutions provides documentation that your loss is realized in the year you sell to us.