You run a small, boutique company that makes high-end hemorrhoid pads. You agree to merge with Ouch-Away, the behemoth Amazon of the hemorrhoid pad industry. But they don’t want to pay cash to buy you out. They are going to use stock.
In effect, they are going to turn your shareholders into shareholders of Ouch-Away. So, they are going to exchange a set number of their shares for each of your shares. The negotiation on the price of the buyout turns to that ratio...the exchange ratio.
Eventually, you decide on a ratio of 0.5 Ouch-Away shares for each share of you company. With your 10 million shares, that exchange ratio means you’ll end up with 5 million Ouch-Away shares once the deal closes.
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Finance: What is a 1035 Exchange?1 Views
Finance a la shmoop....what is a 1035 exchange? well why don't they
give these things a name like what pathos is there in a number well it [Arrow pointing to star in the solar system]
makes your life miserable remembering all these numbers and frankly doesn't
make our life any easier writing pithy epithets about them you know as we go
but all right we'll try here we go...A 1035 exchange is a swap more
specifically it's a swap relating to life insurance policies or annuities you
have one annuity or life insurance policy and want to exchange it for [Two life insurance policy documents]
another of similar value so you use at 1035 exchange to do it's like a legal
structure why well because a 1035 is tax-free.. tax-free yeah that's good why
would there be a tax when you're changing policies well an insurance
policy is just another form of an investment and with it comes a gain
usually over time so if you're exchanging an in theory you [Insurance policies exchanging]
could be realizing a gain that's taxable so if one policy fit your feet from age
25 to 45 and then it tripled in value over that time well you'd have
"realized a gain" if you sold it for cash and then use that cash to buy
another and you'd have a whole lot less cash left over after the feds you know
taxed you and being able to deploy that 1035 exchange tax loophole well you get
to keep all the value in that policy and use it to buy all the value of another
policy thank you insurance industry lobby and yeah you'll be dead but well [Richie Richpants gravestone]
others will too
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