Pay taxes on stock buyout
Tax planning and compliance for investors Free Newsletter. What happens when you hold stock in a company that merges into another one?
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There are different tax rules for various situations, so we'll make some simplifying assumptions:. If the number of new shares you're supposed to receive isn't a whole number, you'll probably receive cash in lieu of instead of the fractional share. You're treated as if you received the fractional share and then sold it for the amount of cash you received.
You have to allocate a portion of your basis to the fractional share. Suppose the formula used for the merger would have given you You ended up with shares plus cash for. Divide the total basis of your old shares by Your basis for the fractional share you "sold" is. In some mergers, part of the consideration is provided in the form of cash. For example, in a merger, shareholders of AirTouch received.
Here's how you figure your gain:. Suppose you held shares of AirTouch common before the merger.
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Capital Gains and Losses. Cash Received in Mergers By Kaye A.
The tax rules depend on the reason you received cash. Capital Gains, Minimal Taxes Top of this online guide: Capital Gains and Losses Related IRS forms and publications: Your Investments Discussion forum: C apital Gains and Losses. Our books That Thing Rich People Do The fastest, easiest way to learn the principles of investing.
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That Thing Rich People Do. A plain-language guide for people who receive stock options or other forms of equity compensation.
A text for financial advisors and other professionals who offer advice on how to handle equity compensation including stock options. Capital Gains, Minimal Taxes. Tax rules and strategies for people who buy, own and sell stocks, mutual funds and stock options.