Business Services Industry
Nonqualified preferred stock.
Tax Adviser, The, January, 2005 by Simpson, Kirsten
The nonqualified preferred stock (NQPS) rules of Sec. 351 (g), originally enacted in 1997, generally treat certain preferred stock as "boot" in certain exchanges under Secs. 351, 354, 355, 356 and 1036. According to Sec. 351 (g)(3)(A), the term "preferred stock" means stock limited and preferred as to dividends and that does not participate in corporate growth to any significant extent.
New Law
AJCA Section 899 further refines the definition of preferred stock for purposes of the NQPS rules, by appending a sentence to the end of Sec. 351 (g) (3) (A), providing:
Stock shall not be treated as participating in corporate growth to any significant extent unless there is a real and meaningful likelihood of the shareholder actually participating in...
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