A. For purposes of the Venture Capital Investment Act, "qualified diversifying business stock" means, except as otherwise provided in Section 7-2D-13 NMSA 1978, any stock in a corporation that is originally issued after June 30, 1994 but before July 1, 2001, if:

(1) on the date of issuance the corporation is a qualified diversifying business;

(2) except as otherwise provided in Subsection B of this section and in Sections 7-2D-9 and 7-2D-10 NMSA 1978, the stock is acquired by the taxpayer at its original issue, either:

(a) in exchange for money or other property, not including stock; or

(b) as compensation for services, other than services performed as an underwriter of such stock; and

(3) the corporation throughout the testing period is an active manufacturing business and a New Mexico business and at the end of the testing period is a successful business.

B. For purposes of Paragraph (2) of Subsection A of this section, stock shall not be treated as acquired by the taxpayer at its original issue if:

(1) it is issued directly or indirectly in redemption of, or otherwise in exchange for, stock that is not qualified diversifying business stock; or

(2) it is issued in an exchange described in Section 351 of the Internal Revenue Code in exchange for property other than qualified diversifying business stock if, immediately after the exchange, both the issuer and transferee of the stock are members of the same controlled group of corporations as defined in Section 1563 of the Internal Revenue Code.

History: Laws 1993, ch. 313, § 4; 1995, ch. 89, § 3.

Cross references. — For Sections 351 and 1563 of the Internal Revenue Code, see 26 U.S.C. §§ 351 and 1563.

The 1995 amendment, effective June 16, 1995, in Subsection A, substituted "Section 7-2D-13 NMSA 1978" for "Section 13 of that act" in the introductory paragraph; substituted "Sections 7-2D-9 and 7-2D-10 NMSA 1978" for "Sections 9 and 10 of the Venture Capital Investment Act" in Paragraph (2); and rewrote former Paragraph (3) which formerly required that stock meet the requirements of Sections 6, 7 and 8 of the Venture Capital Investment Act throughout the testing period.