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Capital Gains/Losses for Cancelled Fractional Shares

I have a bit of a complex tax questions.

In December 2011 I was issues a physical check for cancelled fractional shares of some private shares that I held. Basically, was washed out through a reverse stock split.

However, I cashed the check in 2012. Note that the company has told me that no filings have been made with the IRS for the cancelled fractional share.

So, is the tax event in 2011 or 2012?

I don't see anything on the IRS website on "when" the sales is considered - when the check is cut or when it is cashed. Ideally, I would like to show it as a 2012 tax event but I'm not sure what the legal precedent is.

Thanks,

Reply to
Slim
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These events have a transaction date, the date the shares were turned to cash. That's the date. Holding the check, or even not getting the check till the new year doesn't change the date of the sale. 2011.

Reply to
JoeTaxpayer

If you reasonably could have cashed the check in 2011, that's when you claim the income. When you actually cashed it is irrelevant.

So if you received the check in the morning of December 31 and your bank has a branch relatively near you that is open on Saturdays, then it's 2011. If you received it on December 31 when any bank you could reasonably go to was closed, it's 2012.

___ Stu

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Reply to
Stuart A. Bronstein

Stu,

Thanks for your reply.

The check was mailed in mid-December but I was out of the country from early December to end of March so I only just saw it a few days ago. Hence, it was cashed in 2012. So, I could only reasonably cash it in

2012 but they wrote the check in 2011. Would me being out of the country count as not being able to reasonably cash it? Note that I did not know when they were going to mail the check and my trip was planned in advance.

Out of curiosity, are any of these nuances explained in the tax code somewhere?

Thanks for your replies. Slim

Reply to
Slim

I don't know the answer off the top of my head, by I would doubt it. It's probably an objective test rather than a subjective test. So the payment likely should be allocated to 2011. I haven't researched this point, however, and can't guarantee that answer is correct.

More likely in regulations or court cases than in the tax code. Go to any law library and look at the annotated code from CCH or Prentice Hall for a more thorough idea of what is going on.

___ Stu

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Reply to
Stuart A. Bronstein

See "constructive receipt."

Reply to
D. Stussy

"You cannot hold checks or postpone taking possession of similar property from one tax year to another to postpone paying tax on the income. You must report the income in the year the property is received or made available to you without restriction."

I think we agree the fact that the OP was out of country is immaterial. If that let him postpone receipt for tax purposes, it would be a neat trick to employ at year end when delay of income is desired.

Reply to
JoeTaxpayer

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