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Unlike convertible bonds, SAFs are not remunerated. As a result, five years after issuance, convert SAFEs on the same basis as SAFEs that convert six months after issuance, as there is no adjustment to reflect the value of the money. In addition, in the event of a sale of the company, an investor only recovers his investment without return, for a valuation too low to lead to conversion processing. SaFEs or Simple Agreements for Future Equity, introduced by Y-Combinator in 2013, are a popular investment tool for early-stage start-up financing.1 The Y combinator for SAF is supposed to be a simple investment tool requiring minimal negotiations.2 However, from a tax perspective, the treatment of SAFEs is not so straight forth. In the event of liquidation or sale of an issuer that does not result in conversion, HOLDERS of SAFEs receive a return only after the repayment of all other debts, including liabilities arising from supplies and services. In those circumstances, SAFEs do not even prevail over preferred shares entitled to equal treatment with SAFEs. Convertible bonds, on the other hand, are priorities for all equity and, when guaranteed, can take precedence over all other debts. 1 See blog.ycombinator.com/announcing-the-safe-a-replacement-for-convertible-notes/ (retrieved 20.04.2018) and www.ycombinator.com/documents/ (retrieved 20.04.2018).2 Id.3 See Edward Zimmerman, “The Damaging Shortcuts Entrepreneurs Take When Raising Money”, The Wall Street Journal (30). April 2018) (“There is no doubt that the SAFE and KISS documents will be faster and cheaper – when the deal is first concluded. Unfortunately, this is not the case over time. In SAFEs, KISS documents and convertible bonds, unresolved issues and issues that each relegated to side letters can often make the next fundraiser more complicated and expensive, sometimes leading to negotiations detrimental to the relationship at a time when the company is doing well. »).

4 For example, convertible bonds may be considered equity if the company issuing such debt securities is a start-up company and at the time of issuance it is unlikely to be able to repay the debt without a subsequent investment that would allow debt conversion5 See blog.ycombinator.com/announcing-the-safe-a-replacement-for-convertible-notes/ (called 20.04.2 018) and www.ycombinator.com/documents/ (called 20.04.2018).6 See, z.B. Roth Steel Tube Co. v. Comm`r, 58 A.F.T.R.2d 86-5808, 86-5811 (6th Cir. 1986), cert. denied, 481 U.S. 1014 (1987); Estate of Mixon v. United States, 30 A.F.T.R.2d 72-5094, 72-5098-99 (5th Cir. 1972); Fin Hay Realty Co.

v. United States, 22 A.F.T.R.2d 5004, 5005-06 (3d Cir. 1968); Revenue Ruling 83-98, 1983-2 C.B 40. See also section 385 (b). Unless otherwise noted, all references to the 1986 Internal Income Code, as amended, or to the treasury regulations proclaimed therein.7 See Farley Realty Corp. . . .