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Crowdfunding: A Popular Way to Invest, but Watch Out for Taxes

Volume 3 No 7    /    Read Article

By Philip R. Hirschfeld and Elizabeth V. Zanet

Crowdfunding is an internet-based form of raising capital for businesses and other endeavors that is popular with millennials. Millions of dollars are raised each month through crowdfunding, but it is unlikely that much thought has been given to the tax consequences for investors and the companies being funded. The ways in which crowdfunding transactions are structured vary significantly, and as a result, the tax consequences vary. In Information Letter 2016-0036, the I.R.S. explains its view of the tax consequences. The tax consequences may not be benign for the company raising the funds unless certain conditions exist. Philip R. Hirschfeld and Elizabeth V. Zanet explain the I.R.S. view.    See more →