Reorganization


G

George Anthony

Due to a merger which qualifies as a reorganization, the
taxpayer received 1.098 shares of YYY stock and a cash
payment of $3.023 for each share of XXX stock he held.
These shares were purchased in the 80's. The cash payment
exceed $19,000 and he received certificates for the YYY
stock.

Will the cash payment be treated as a long term capital
gain? Will the basis of the new stock be the basis of the
old stock?

Thank you in advance

George L Anthony
(e-mail address removed)

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
Ad

Advertisements

S

Seth

George Anthony said:
Due to a merger which qualifies as a reorganization, the
taxpayer received 1.098 shares of YYY stock and a cash
payment of $3.023 for each share of XXX stock he held.
These shares were purchased in the 80's. The cash payment
exceed $19,000 and he received certificates for the YYY
stock.

Will the cash payment be treated as a long term capital
gain? Will the basis of the new stock be the basis of the
old stock?
No.

Each share of XXX cost something. For it, he gets 1.098 shares of YYY
and $3.023. Allocate the cost of the XXX proportionately to the YYY
and $3.023. The excess of $3.023 over its share of the cost of XXX is
long-term capital gain. The remainder of the cost of XXX is the basis
for YYY.

Seth

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top