Big Small Stocks (Part 2)

Universities may be rich warehouses of potential stock market treasures. The key is for investment planners to segregate between far-fetched projects of academic interest only, and others that combine business considerations with sound technology. The technologists, who started Lilliputian Systems Incorporated, have used market insights with their laboratory discoveries to make a winning combination in future stock price terms. They have also buttressed private equity funds with research grants from the US military, which is a sound way to stay independent of acquisitive corporations. All of us can learn from the Lilliputian example of how to pick candidates for a fledgling private equity venture from the Ivy League of the world!

Tax Cautions for Private Equity

Private equity transactions involve sophisticated investing behavior such as dealing in derivatives and futures. Hedging is a nearly inevitable part of risk management. That is why private equity moves by small stock investors should stay abreast of relevant IRS rulings. Notice 2002-50 for example, says that the IRS will disallow losses involving straddles. The logic is unclear since risk management should be encouraged rather than penalized, but who is to argue with a rich Uncle? Tax planning is integral to successful operations of private equity.

Join our forum if you would like to know more about landmark rulings of the IRS with respect to disallowing losses in derivative and hedged stock trading transactions. We would also love to hear from you if you are associated with Lilliputian Systems, or if you are privy to other scientific breakthroughs from the laboratories of our top colleges.