Discussion Archives:GM Bonds (Old) Converted to GM Stock (Old)

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Discussion Forum Index --> Advanced Tax Questions --> GM Bonds (Old) Converted to GM Stock (Old)


Discussion Forum Index --> Tax Questions --> GM Bonds (Old) Converted to GM Stock (Old)

Successwillbe (talk|edits) said:

22 April 2010
I have a client who converted two issues of GM Bonds. (XGM - CUSIP 370442774 - 1000 ea, HGM - 370442766 - 120 ea). He accepted the offer to convert to GM(old) stock and executed on May 21, 2009. As part of the offer the GM stock (CUCIP 370442105) will do a reverse split to 1 for 100 before converted shared are distributed. The conversion to common was 225 common shares for each $1,000 Principle Amount. No fractional shares will be issued. The results at a later date will be receipt of 2 shares of GM Common (New) with fractions dropped.

The bond denomination is $25 per bond. so 1000 shares * $25 = $25,000. So 25 units of $1000 principle times 225 shares per $1000 is 5625 (25* 225) shares. With 1 for 100 reverse split the common GM(0ld) is 56 shares (no fractional shares)

The median price on 5/21/09 of GM (Motors Liquidation Corporation) was $1.65 - (1.65 * 56 = $92.40 basis in new shares. Factional share not received was .25 * 1.65 or $.41

Loss = $18,200 + $.41 - 92.40 = 18,107.19


After reading Prospectus, IRC 301, 305(b)(4), 305(c) Reg 1.305-5(d), 1.305-7, The exchange is considered a distribution of property not covered to defer gain or loss and they do recognize gain or loss. However......

Questions:

1. Somewhere and I cannot find the reference, if exchange of property results in loss for a reason I cannot recall they cannot take the loss unless shock is sold. I know the stock is still on OTC and trading so not worthless. Can they take the loss?

2. Was issued in $25 denomination per bond - is $25 the principle amount defined in offer that accumulates to $1000.?

3. Note sure I'm figuring the value of shares at end. With the reverse split I did not see the stock price change, so not sure this was a true reverse split. GM(old) is still on OTC at about $.60.

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