  We report a comprehensive study of the paradigmatic quasi-1D compound
(TaSe4)2I performed by means of angle-resolved photoemission spectroscopy
(ARPES) and first-principles electronic structure calculations. We find it to
be a zero-gap semiconductor in the non-distorted structure, with non-negligible
interchain coupling. Theory and experiment support a Peierls-like scenario for
the CDW formation below T_CDW = 263 K, where the incommensurability is a direct
consequence of the finite interchain coupling. The formation of small polarons,
strongly suggested by the ARPES data, explains the puzzling
semiconductor-to-semiconductor transition observed in transport at T_CDW.
