Investing & Financing: Microcaps?

What's your definition of a microcrap? I've invested in companies with less than $100 million before, but I've never put money in a stock that only have $1-10 million in equity.

I think if you're just getting into investing in public shares that dealing with larger caps is a much better proposition. There is much more information on them (particularly in the US) that you can make much more informed decisions. There are several risks associated with penny stocks, namely:

1) Lack of information - smaller companies have no analysts following them, so all you have to rely on is information put out by the company. It's in their interests to highlight good info and hide bad news (as best they can without doing anything illegal).
2) High Volatility - penny stocks change value drastically on a percentage basis, making very hard to ascertain their true value. They typically trade dramatically on news (good and bad) and then settle down into some sort of holding pattern (ie. some range of prices) until the next piece of news. This makes things very unpredictable and are inherently hard to time.
3) Low liquidity - just because you think it's time to sell doesn't mean anyone else wants to at a price that you like. You're faced with taking a much lower offer, or holding on and hope that the value doesn't drop too much before you can trade. Quite a few penny stocks won't trade for days or even weeks, making it really hard to get in/out at reasonable prices.

If you have what I'd call 'enhanced' information about a company (stuff that someone sitting at a computer might have a hard to impossible time finding) that you believe demonstrates that a microcrap is more valuable than what it's trading at, then you may want to invest (eg. maybe it's a local company that has generated some local news but hasn't been disseminated into the markets yet). Otherwise look for companies that you can get a fair bit of information on and start there.

There's definitely a place for penny stocks and the like in a portfolio, but you should get some experience dealing with better behaved stocks before you try your hand at these.

You're welcome - I'm not familiar with U.S. capital gains taxes so I can't help there. In Canada all capital gains on public shares are taxed the same, regardless of holding period on the shares.