I'm not a US citizen, not an accountant, not a lawyer...
By returning the "gift", would that be treated as a NOP by the IRS and therefore no tax liability?
I still don't see how PTS 2.0 can make any sense/have any value.
This decision seem to both enable PTS 2.0 (no more huge stake of I3 that would have too much voting power) and undermine it (the new PTS 2.0 must now be post november 5th snapshot, which does not represent well the real founders anymore, since many PTS were sold - or is that false ?).
I hope that the real reasons behind this will be revealed soon, as well as the reasons behind the form of this murky revelation : playing the interpretation game is a waste of time, and this thread gives a very bad impression.
Real reasons? What kind of evil conspiracy could this represent? They have already said that no government agencies have contacted them thus this is not being forced on them.
One can easily read between the lines and see that this is being done for tax purposes. If they return the funds this year and reject the donations thereby rescinding the transactions then the result is to declare any and all contract between PTS donors and Invictus void as well as to make the transaction nonexistent for tax purposes. If they keep the funds then they either have to spend them or pay taxes on their receipt.
The IRS didn't publish their guidance until after AGS was started. According to IRS guidelines income from virtual currency payments is taxed at the value it had upon receipt. If I3 had originally planned to treat PTS/BTC as a currency then these guidelines would have changed how profit, income, and expenses would be calculated. Treated as a currency I3 would only have income equal to the present value of the PTS (a couple hundred thousand dollars). Under this new IRS treatment I3 would face an income tax bill based upon a $3+ million valuation of PTS at the time it was given which could not be offset by the capital loss.
Rescinding the PTS transactions moves the capital loss from I3 back to the donors and removes $3+ million worth of fantom-income from I3's balance sheet. The donors can use the capital loss from PTS to offset the capital gains from BTSX, DNS, Play, etc which have a cost basis of 0.
They were probably advised that if they kept the donations and the IRS declared them income to I3 they would have to pay 35% tax on the value of the donations at the time they were received. They clearly couldn't pay a $1 million tax bill by selling the PTS they have. Refusing to accept the donation is the only thing they could possibly do.
I3 also has about $3 million worth of income from BTC which they will have to pay taxes on if it is not spent in 2014 on business expenses. I suspect this is a large motivating factor for giving the development team large end-of-year bonuses. The developers will still have to pay taxes on the income, but it won't be double taxed. Almost all companies with large profits end up doing this kind of thing at the end of the year.
Looking at the public BTC balances it looks like I3 is on track to spend all of the BTC they received this year. My guess is that they will end up spending a total of $3 million on deductible expenses by Dec. 31st which will completely offset the value of the BTC donations. Any capital losses they incurred from BTC falling will offset capital gains made on BTSX that they have spent.
Assuming they are working with a world class accounting firm they have likely legally organized themselves in such a way as to pay little or no corporate income tax on the donations they received.
After racking my head about what would motivate them to give back all of the PTS this is the clear open and shut case. It is also clear that if this is the reason, those who gave PTS would clearly support rescinding the donation. I could be completely wrong.
This theory also explains the push to enable dilution to fund development. I3 has burned through the donations. This probably happened because BTC fell 50% and I3 was budgeting on the original value and not the present value of BTC. So while they raised $3 million in BTC they were only able to buy about $2 million in development and had to burn through $1 million worth of the BTSX they were given to avoid a $350,000 tax bill they would be unable to pay without dumping BTSX on the market.
Some may look at this explanation and assume I3 has mismanaged their development fund to run out in 1 year. In my opinion they have done a great job managing the funds and have produced $50 million worth of value based upon $3 million dollars worth of R&D in just 1 year while securing the long term future for BTS at the same time.
The IRS has effectively forced all businesses accepting crypto-currencies to liquidate immediately because otherwise they could face income taxes on the value at the time of receipt and be unable to offset that income with capital losses. A very sly move by the IRS that effectively kills using crypto as a currency to actually buy things.
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