dazed wrote:

- quote -

I'm going to disagree some with the other posts, largely
because you have a non-US company and this means the
transaction may very well *NOT* have been designed to comply
with U.S. requirements. The default under U.S. law is that
such a transaction is taxable--however, U.S. public
companies generally structure their deals to comply with the
tax free provisions that Brian mentions.

The problem, though, is that a foreign corporation will have
at least one other jurisdiction they are going to worry
about--and for various reasons it may not be possible or a
good move under the law in their primary location to
structure the deal to meet U.S. requirements.

As was noted, generally there *will* be some information
available from shareholder relations on whether or not the
transaction is tax free for U.S. purposes.

--
Ed Zollars, CPA
Phoenix, Arizona

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"dazed" <testid[at]optonline.com> wrote:

- quote -

You don't give enough information to be sure of the answer,
although usually the tax-free reorganization rules (not the
involuntary conversion rules) would make some or all of your
deal tax free. If theses are public companies, they likely
have investor information sections on their websites that
would likely discuss the tax consequences, or at least have
contact persons who can direct you to the person that can
answer you with certainty.

Brian Bivona, CPA

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- quote -

In all likelihood, this will be treated identically to the
situation where both companies were US-based. You allocate
your cost basis in A to all of the new shares of B,
including the fractional shares. You then sell the
fractional shares, deducting the basis allocated to them
from the cash received to determine any capital gain or
loss. The fractional share is assumed to come from the
earliest lot of A purchased (if multiple purchases) using
FIFO rules.

Ira Smilovitz

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I owned stock (ADSs, actually) in Firm A, which was
purchased this year by Firm B (still European, so still
ADSs). I was issued new stock in Firm B to almost
completely replace the shares I owned in Firm A, except for
a little cash to cover fractional shares.

Is this situation typically considered an involuntary
exchange, with therefore no effect on my 2004 tax, or am I
to calculate and report the gain? (I assume that capital
gains tax will apply to the cash portion, since cash and
stock are not *substantially identical*.)

The IRS publications, typically quite useful, do not appear
to answer this question.

Thanks -

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