"Cheap Stock” and Section 409A Considerations - Pillsbury Law

Private companies that consider going public may not be aware of the overlap between Section 409A of the Internal Revenue Code and cheap stock accounting issues. If a company makes grants of equity awards prior to going public at share prices that are much lower than the initial public offering price, this could lead to accounting charges for the company. But, perhaps more significantly, this could also highlight tax compliance issues under Section 409A.

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