Public Company Buyout


J

James

Looking for advice on what I think is a simple matter.

I purchased shares of Glamis Gold last year. In November of last year, it
was bought out by GoldCorp (GG). My 1099-B shows a sale of 100 shares of
Glamis at $0.01. Not sure what to report as the cost basis for this, or
really what to do with it. I thought the whole thing was tax transparent
and that my original Glamis purchase remained as my cost basis for GoldCorp.

Thank you!
 
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E

Ernie Klein

James said:
Looking for advice on what I think is a simple matter.

I purchased shares of Glamis Gold last year. In November of last year, it
was bought out by GoldCorp (GG). My 1099-B shows a sale of 100 shares of
Glamis at $0.01. Not sure what to report as the cost basis for this, or
really what to do with it. I thought the whole thing was tax transparent
and that my original Glamis purchase remained as my cost basis for GoldCorp.
Merged or bought out - two different things.

If it merged with GoldCorp then you should have received an advice
telling you how many shares of GoldCorp you own. This usually is not
taxable to you, but you should have received information from the
company about that. Partial shares of the old company many have been
sold rather than converted into the new company. i.e. you own 11 shares
and the conversion is 2 for 1, therefore you would get 5 shares of the
new with 1 share left over, which would be sold. For that share you
would report the sales price and basis which is what you paid for it.

However, if it was a total buyout where GoldCorp simply paid so much for
the existing shares of Glamis (probably Galmis shareholders were given a
chance to vote to approve the takeover?) then they simply bought your
shares whether you liked it or not and should have sent you a check for
the proceeds (probably not much if a penny a share).

If the latter is the case, report the sale on schedule D for what the
stock was sold for. Your basis will be what you paid for the stock PLUS
any brokers commissions you paid. You probably payed more than a penny
a share so you should have a loss which will decrease you taxable income
and lower your taxes.
 
J

James

GoldCorp bought Glamis. The 1099-B shows ALL of the shares I owned being
sold with a total proceeds of $0.01. I never did a thing, as it was done
automatically by the brokerage company. It was sold, went into an escrow,
then bought GoldCorp. I could see it as a wash maybe, but the total
proceeds being $0.01 doesn't make any sense to me, especially in trying to
determine cost basis.

Thanks!
 
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E

Ernie Klein

James said:
GoldCorp bought Glamis. The 1099-B shows ALL of the shares I owned being
sold with a total proceeds of $0.01. I never did a thing, as it was done
automatically by the brokerage company. It was sold, went into an escrow,
then bought GoldCorp. I could see it as a wash maybe, but the total
proceeds being $0.01 doesn't make any sense to me, especially in trying to
determine cost basis.

Thanks!
OK, I looked it up for you on GoldCorp's web site.

http://www.goldcorp.com/news_releases/index.php?mod=cnt&act=cnt&id=542

It states in part:

"VANCOUVER, BRITISH COLUMBIA, November 4, 2006 ­ GOLDCORP INC. and
GLAMIS GOLD LTD. today announced that Goldcorp has completed its
previously announced acquisition of Glamis. Effective immediately, each
Glamis share has been exchanged for 1.69 Goldcorp shares and $0.0001 in
cash."


So you haven't really sold any shares of Glamis, they have been
converted to shares in GoldCorp. For every share of Glimas that you
owned, you should now own 1.69 shares of GoldCorp. If you owned 100
shares of Glamis as you indicate then you should have 169 shares of
GoldCorp now. This is an acquisition. Usually cash given along with
stock is treated as dividends rather than selling shares, but Canada may
do it different.

You should contact your broker and ask why they sent a 1099-B stating
you _sold_ your 100 shares of Glamis when it looks like it was in fact a
stock exchange rather than a sale. I think you will find that they were
only reporting the $0.0001 X 100 = $.01(rounded off) though and not the
_actual sale_ of your shares, which weren't sold at all but exchanged.
Get your broker to clarify this as you don't want the IRS to think you
have not reported a sale of your shares.

You _should_ have received an information package from the company
(through your broker) explaining the tax implications if any and telling
you how to calculate your basis for the new stock. If you didn't, ask
your broker why not -- you can probably find all of that information on
the web site above yourself, though.

You should check your account with your broker although, to be sure
everything was done right and the new GoldCorp stock is there like it
should be.

And by the way, please don't top post. It makes it difficult to read
and comment on your post.
 

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