Angel taxes

Back to basics: angel taxes wrap up

So to recap:Angel investments aim to generate cap gains (which is better than ordinary income)Frequently, those gains are totally exempt from capital gains under Section 1202 (which is better than pretty much every other asset you can invest in ).If they’re not...

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Back to basics: LLC passthroughs

You hopefully noticed that the really great benefits of Section 1202 and Section 1045 were focused on C-Corps. They don’t apply if you invest in an LLC. Do LLCs have some alternative benefits? Yes, they do: pass-through losses.As quick background: An LLC is a...

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Back to basics: Limits on Section 1244

Yes, there are some limits on Section 1244 losses. The $50k / $100k is one. Another is that it only applies to the first $1M that went into a company. This is almost always true of “family and friends” money; it’s often true of the angel rounds; it’s generally not...

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Back to basics: Section 1244 continued

Section 1244 gets even shinier.In usual capital loss situations, you really need capital gains to offset the losses against, because you can only take up to $3,000 in net capital loss in a given year. (You roll forward the rest to future years). But under 1244, you...

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Back to basics: Section 1244

The “silver lining” from the last post of being able to write off the capital loss against other capital gains was a dull, scuffed silver. Today’s silver lining, called Section 1244, is a burnished, luminous, refulgent gleaming silver. Section 1244 of the tax code...

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Back to basics: Write offs

The angel taxes posts in this series so far have covered when angel investing goes well. What about when things go wrong?In general, if you lose money on an investment, you can offset that “capital loss” against a capital gain you have from something else.For example,...

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