Santa Clara Valley Housing Group, Inc. v. United States, No. 5:08-cv-05097-WHA, 2012 U.S. Dist. LEXIS 5651 (N.D. Cal. Jan. 18, 2012)

(case involves whether warrants issued by an S corporation to shareholders in connection with shareholders participating in tax shelter constituted second class of stock that would disqualify the corporation from S corporation status; court noted that instruments, obligations and arrangements are not treated as second class of stock unless they are instruments, obligations or arrangements that are treated as equity in accordance with Treas. Reg. §1.1361-1(l)(4)(ii) or call options, warrants or similar instruments under Treas. Reg. §1.1361-1(l)(4)(iii); on reconsideration, court ruled that safe harbor of Treas. Reg. §1.1361-1(l)(4)(iii)(C) for call options applies if strike price of warrants is at least 90 percent of fair market value of underlying stock on date warrants issued; case to proceed to trial on issue of application of safe harbor; court’s previous ruling modified). 

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