ANGEL VENTURE CAPITAL GAIN DEFERRAL See Form IN-111, Section 3, Line 14d See also 32 VSA §5930v Vermont excludes 40% of capital gain from Vermont income tax. A taxpayer may defer Vermont income tax on the remaining 60% of a capital gain when investing the capital gain in an eligible venture capital investment within two years of receipt of the gain. To claim the deferral on the Vermont income tax return, complete the Angel Investment Capital Gain Deferral Worksheet. A qualified investor is an individual or pass-through entities of a partnership, limited liability company or S corporation that are eligible for the deferral. Partnership, limited liability company or S corporation allocate the capital gain deferral amount to its partners, members or shareholders. The investor cannot be, however, a substantial owner of the business receiving the investment. A substantial owner is a person who • Holds 25% or more ownership interest in the business after the investment including attribution of ownership interests of the person’s spouse, parents, spouse’s parents, siblings, and children; or • Controls by, or has actual control of, the business receiving the investment through any combination of ownership or management. An eligible venture capital investment is an investment up to $200,000 of capital gains by one person (or pass through entity) in a qualified business for expenditure by that business on plant, equipment, research, and development or as working capital and represents at-risk debt investment1 or equity investment. A qualified business is a business with its principal place of business in Vermont; and had annual gross sales of $3,000,000 or less in the year preceding the investment; and it is primarily engaged in • creation or production of tangible personal property for sale; or • development or application of advanced technologies2; or • production of a product or service that is or will be sold or provided predominantly outside the state.
At-risk debt means debt not secured, is not guaranteed by a substantial owner of the business, will not be repaid for at least five years, or bears a reasonable rate of interest. 2 Advanced technologies means any technology that may be used to perform a new function or an existing function in an improved fashion and which is significantly different from currently commonly used technologies.
1
Tax Year long-term capital
2005
ANGEL INVESTMENT CAPITAL GAIN DEFERRAL WORKSHEET
COMPLETE QUESTIONS ON PAGE 2 TO DETERMINE IF YOU ARE A QUALIFIED TAXPAYER AND IF YOUR INVESTMENT IS TO A QUALIFIED BUSINESS VENTURE
TAXPAYER NAME
SOCIAL SECURITY NUMBER
ADDRESS
TOWN/ / CITY
STATE
ZIP
IF THE ELIGIBLE VENTURE CAPITAL INVESTMENT WAS MADE BY AN S CORPORATION, LLC OR PARTNERSHIP, COMPLETE THE ENTITY INFORMATION BELOW
ENTITY INFORMATION
NAME FEIN
ADDRESS
TOWN / CITY
STATE
ZIP
QUALIFIED BUSINESS See page 2 for requirements of Qualified Business
NAME FEIN
ADDRESS
TOWN / CITY
STATE
ZIP
DEFERRAL CALCULATION
1 2a 2b
Eligible Venture Capital Investment 2005 Long-term capital gain 2005 Short-Term Capital Gain TOTAL 2005 Capital Gain Enter 60% of Line 2c Enter the smaller of Line 1 or Line 3 here and on Line 14d of Form IN-111
2a 2b
1
$
$ $ 2c
3 4
2c
3 $ 4
$
QUALIFIED TAXPAYER REQUIREMENTS: Answer the following questions to determine if you, or
the entity making the investment, are a Qualified Taxpayer 1. Is any part of a Qualified Business owned by: you, or any member of your family, or an entity in which you or a family member hold an interest? 2. After the investment of the capital gain, did you hold an ownership interest in that business greater than 25%, including attribution of ownership interests from your spouse, parents, spouse’s parents, siblings, and children?
[] YES Go to Question 2
[]
NO Go to Question 3
[] YES
You are not eligible for the deferral
[]
NO Go to Question 3
3. For the business in which you invested capital gain, do you have ownership or control through any combination of ownership and management, or are you an entity owned or controlled by a person with such ownership or control of that business?
[] YES
You are not eligible for the deferral
[] NO You are a Qualified Taxpayer.
Go to Qualified Business Section
QUALIFIED BUSINESS REQUIREMENTS: Answer the following questions to determine if the investment is in a Qualified Business
A. Does the business have people or property outside Vermont?
[] YES Go to Question B [] YES Go to Question C
[] NO Go to Question C [] NO
This is not a Qualified Business
B. Is the principal place of business in Vermont?
Attach explanation and percentage of VT payroll & property
C. What is the amount of gross sales by this business in 2004? $_____________________ If gross sales more than $3,000,000 This is not a Qualified Business D. Check all that apply to the business: [] Primarily engaged in creation or production of tangible personal property for sale
PRODUCT DESCRIPTION
[] Primarily engaged in development or application of advanced technologies
TECHNOLOGY DESCRIPTION
[] Provides a product or service that is or will be sold/provided predominantly outside VT
E. The business will use the investment for:$__________________ Plant & Equipment in VT $__________________ Research & Development in VT $__________________ Working capital in VT
AT-RISK INVESTMENT
1. 2. 3. 4. Was the investment of capital gain accounted by the Qualified Business as [] Equity [] Debt If a debt, indicate annual rate of interest _________ and repayment date _________________ If a Debt, is the loan secured? [] YES [] NO If YES answer to You are not eligible Is the loan guaranteed by any person? [] YES [] NO Question 3 or 4 for the Angel
Investment Capital Gain Deferral.