Your uncle is ready to retire and head for the hills, so he says to you: “Look, I own 500 shares of stock in Startup, Inc. I’m ready to cash out, so I’ll sell it to you for the very same $25,000 I paid for it back in 2012. And, by the way, it’s qualified small business stock, so you’re completely protected on the downside – even if the company went under, you would get 100% tax cushion for the loss! What do you say…???”   On its face, what’s wrong with this offer?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Your uncle is ready to retire and head for the hills, so he says to you: “Look, I own 500 shares of stock in Startup, Inc. I’m ready to cash out, so I’ll sell it to you for the very same $25,000 I paid for it back in 2012. And, by the way, it’s qualified small business stock, so you’re completely protected on the downside – even if the company went under, you would get 100% tax cushion for the loss! What do you say…???”

 

On its face, what’s wrong with this offer?

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