a small sportsman's organization (a corporation) redeemed some of its shares last year and is holding them as treasury shares. When these shares are sold to new members at a higher price than their redemption, is the "extra" money treated as profit or an increase in the capitalization of the corporation?
"Gil Faver" shares last year and is holding them as treasury shares. When these shares
not as "profit" to the business. It is however, an increase in capital, specifically called "additional paid in capital" - which is the amount received above the stated face amount of each share. So, if the face on the share is $100, and they sell for $150, then you book stock at $100 and APIC of $50. Hopefully you get cash, and the corresponding increase in cash is $150.
Thanks Paul. That is what I was thinking.
Now, for a twist: What about the case where a departing member sells his share (through the corporation) to a new member (who has passed the corporations vetting process) and the corporation keeps, say, 10% of the sales price? Is that 10% income of some sort, or APIC?
thanks.
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