- quote -

A public company would probably never do it. The closely
held company I used to work for did it to buy out over time
a group of minority stockholders.It was a taxable event for
the outgoing shareholders.

They could have been given non-voting preferred stock on a
tax-free exchenge, but it would have benn Seccion 306 stock
(gain on sale taxable as ordinary income).

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Dick Adams <rdadams[at]smart.net> wrote:

- quote -

What gain? All you received is stock, not money. When you
do sell the stock you _might_ have a gain, unless what went
up, goes back down, and you end up selling for less than
$40/share -- then you will have a loss, and no gain at all.

--
-Ernie-
"There are only two kinds of computer users -- those who have
suffered a catastrophic hard drive failure, and those who will."
Have you done your backup today?

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Dick Adams wrote:

- quote -

Direct answer: On a straight swap the cost basis and holding
period moves to the stock. There is no taxable event until
the stock is sold.

- quote -

Never heard of such a thing and can't figure out why any
company would do it or whether they can do it. One sells
debt instruments to raise cash.

- quote -


<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

When you have convertible bonds and you exchange them for
stock, is there a taxable event. Example: A convertible
bond with a face value of $1000 is convertible into 25
shares of common stock. When the stock is $50 per share,
you convert. Your basis in the stock is now $40 per share
($1000 / 25). When are you taxed on the $250 gain? Now
or upon sale.

Can a company issue bonds that can be purchased with
existing stock. If so, how is that taxed?

I ask this because I know that stock for bonds does not
appear to be a like-kind exchange.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << Just tell the IRS auditor you read it on the Internet. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >