Discussion:Cost basis of demutualized company stock
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| Revision as of 18:40, 3 January 2008 Belle (Talk | contribs) (I have a client) ← Previous diff |
Revision as of 23:13, 23 October 2008 Jokadah (Talk | contribs) (A client just fo) Next diff → |
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| {{ForumReplyPost|UserID=Belle|Date=3 January 2008|Text=I have a client with the same situation, but hadn't really considered the capital gain vs ordinary income aspect. I treated the $$ as ordinary income when I did year end projections, but after your question, I'm going to consider that some of the money might be capital gain. | {{ForumReplyPost|UserID=Belle|Date=3 January 2008|Text=I have a client with the same situation, but hadn't really considered the capital gain vs ordinary income aspect. I treated the $$ as ordinary income when I did year end projections, but after your question, I'm going to consider that some of the money might be capital gain. | ||
| Opinions on how to split will be welcome, or just in general will be welcomed.}} | Opinions on how to split will be welcome, or just in general will be welcomed.}} | ||
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| + | {{ForumReplyPost|UserID=Jokadah|Date=23 October 2008|Text=A client just forwarded me an article that was in the Sacramento Bee 8/28/08 regarding a ruling by the IRS in Aug, 2008 stating that the IRS ruled that stock distributions by Mutual Life Ins Co in the demutualization process are tax free. Does anyone have any further information on this?}} | ||
Revision as of 23:13, 23 October 2008
Discussion Forum Index --> Tax Questions --> Cost basis of demutualized company stock
| 22 February 2006 | |
| I have a client who sold stock received from a demutualization of their medical insurance company. What cost basis do I use for the stock sale? The client held the stock for 5 years. Could this be considered an involuntary conversion?
Thanks, Rob Buden | |
| 22 February 2006 | |
| The Service has consistently ruled that the cost basis of stock acquired in a life insurance company demutualization is zero. Presumably, they would take the same position on a medical insurance company demutualization. | |
Chautauqua (talk|edits) said: | 22 February 2006 |
| Zero is correct. | |
| 8 March 2006 | |
| Appears we now need to file protective claims for Federal purposes on demutualization sales we reported in 2002 with zero basis until the courts rule. Federal carries a 3 yr statute but CA carries a 4 yr statute. Wonder if CA would conform...guess we need to file protective claims for F & CA? (Per Kiplinger Tax Letter 1/27/06.....Fisher, Ct of Fed Claims) | |
| 8 March 2006 | |
| It is an interesting case. You start out with a life insurance policy that has inherent ownership. You get stock and keep policy. Stock has fmv on date of distribution. Is policy worth any less? Will clients pay for protective claims? | |
| 8 March 2006 | |
| For a $12k potential refund and in excess of $35k once you add the 2001 state tax refund...almost can't afford to not file them cause we don't know what the courts will rule. Wish that case hadn't happened...especially during tax season. Guess we only need to file each return as the statute approaches expiration. | |
| 3 January 2008 | |
| I have clients in Nevada who recieved funds from the demutualization of a workmans compensation insurance company. Previous to the court case questioning the basis of the stock pay out I was consistenly advised to treat this payout like any insurance demutualization. ( Capital gains treatment and zero basis) Now I am thinking that some portion of the payment is ordinary income because it is a return of fully deductable premuims (Workmans comp insurance). I would appreciate any opinions on this matter. | |
| 3 January 2008 | |
| I have a client with the same situation, but hadn't really considered the capital gain vs ordinary income aspect. I treated the $$ as ordinary income when I did year end projections, but after your question, I'm going to consider that some of the money might be capital gain.
Opinions on how to split will be welcome, or just in general will be welcomed. | |
| 23 October 2008 | |
| A client just forwarded me an article that was in the Sacramento Bee 8/28/08 regarding a ruling by the IRS in Aug, 2008 stating that the IRS ruled that stock distributions by Mutual Life Ins Co in the demutualization process are tax free. Does anyone have any further information on this? | |
