As far as I can tell from the pubs, an involuntary conversion of stock (i.e. a company buys out, via a tender offer, another company and then forced shareholders that did not tender their shares to sell), is not an involuntary conversion for tax purposes. Can somebody please tell me that I am wrong.
Involuntary conversion of stock.
Aug 04, 2009
8 Replies
It's an involuntary conversion (Title 26, Subtitle A, Chapter 1, Subchapter O, Part III, Sectioh 1033), but since it's a conversion into similar property, under the General Rule it is not a tax event. Your basis and holding period are carried over to the new shares.
Steve
I think he is saying that he did not tender his shares; the company making the offer was successful; and his shares were converted to cash. As such, it is treated no differently then any other sale of stock.
Oops. Right, I misinterpreted it as an exchange.
Steve
If you got cash only, it's a sell. If you got something else, then it depends...
You are correct. It is not an involuntary conversion for tax purposes.
from the pubs, an involuntary conversion of stock
Here's how the tax code describes an "involuntary conversion" in section 1033:
§ 1033. Involuntary conversions (a) General rule If property (as a result of its destruction in whole or in part, theft, seizure, or requisition or condemnation or threat or imminence thereof) is compulsorily or involuntarily converted
Doesn't the seizure/condemnation or threat thereof have to come from a government entity?
What does that do to the "destruction...,theft" part, if so?
Seems that need more of the verbiage than was posted for to make a cogent reading of what it actually says, though, and I didn't go look it up.
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