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Message |
Guest
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 Posted:
Thu Oct 20, 2005 9:26 pm Post subject:
Mergers between two funds |
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|
Years ago (before the tech bubble burst) I had bought into a
high-flying technology fund X. Even though the price kept
falling, I did not sell the fund and was sitting on the
losses.
Along came a fund Y and converted my shares of fund X into
their fund at the market value at the time (around May '05).
I could have sold the fund X before the merger and booked
the losses which I would have been able to deduct.
Now, can I do anything as far as taxation is concerned,
about the money I really lost?? This would be my cost basis
in fund X and the total amount for which the fund Y
converted to their shares??
For example, my cost basis in fund X was $100. The price at
the time of merger was $50. That's what the worth I got the
shares of fund Y for. So, effectively I lost $50. Had I sold
fund X, I could have deducted $50 from other gains on my tax
returns. But Now, is there any way for me to be able to
deduct $50?
I don't see any way but I am hoping someone has a way around
it.
Thanks.
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Mark H
Guest
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| Posted:
Fri Oct 21, 2005 8:00 am Post subject:
Re: Mergers between two funds |
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|
<nitinsane@gmail.com> wrote:
| Quote: | Years ago (before the tech bubble burst) I had bought into a
high-flying technology fund X. Even though the price kept
falling, I did not sell the fund and was sitting on the
losses.
Along came a fund Y and converted my shares of fund X into
their fund at the market value at the time (around May '05).
I could have sold the fund X before the merger and booked
the losses which I would have been able to deduct.
Now, can I do anything as far as taxation is concerned,
about the money I really lost?? This would be my cost basis
in fund X and the total amount for which the fund Y
converted to their shares??
For example, my cost basis in fund X was $100. The price at
the time of merger was $50. That's what the worth I got the
shares of fund Y for. So, effectively I lost $50. Had I sold
fund X, I could have deducted $50 from other gains on my tax
returns. But Now, is there any way for me to be able to
deduct $50?
I don't see any way but I am hoping someone has a way around
it.
|
You may have a taxable event here. Its not entirely
possible to determine based on the facts given. However, by
way of example (and see how this fits your facts) lets use a
mutual fund family that offers several different funds.
Lets say you purchase $100 of Vanguard's S&P 500 fund. You
"exchange" those shares for another fund in the Vanguard
group at a time when the shares are work $125. You in
effect sold the shares and bought shares in another fund and
thus have a $25 taxable gain. The same holds true if it
were in a loss position. There are rules to be wary of
regarding selling & buying back shares of the same stock or
fund in too short a time period (wash-sale rules) but while
your question doesn't seem to make that an issue, there's
not enough info given to know. Bottom line, you may have a
taxable loss, you should run it by your tax accountant.
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<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
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DF2
Guest
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| Posted:
Fri Oct 21, 2005 8:00 am Post subject:
Re: Mergers between two funds |
|
|
In misc.taxes.moderated, nitinsane@gmail.com wrote:
| Quote: | Years ago (before the tech bubble burst) I had bought into a
high-flying technology fund X. Even though the price kept
falling, I did not sell the fund and was sitting on the
losses.
Along came a fund Y and converted my shares of fund X into
their fund at the market value at the time (around May '05).
I could have sold the fund X before the merger and booked
the losses which I would have been able to deduct.
Now, can I do anything as far as taxation is concerned,
about the money I really lost?? This would be my cost basis
in fund X and the total amount for which the fund Y
converted to their shares??
For example, my cost basis in fund X was $100. The price at
the time of merger was $50. That's what the worth I got the
shares of fund Y for. So, effectively I lost $50. Had I sold
fund X, I could have deducted $50 from other gains on my tax
returns. But Now, is there any way for me to be able to
deduct $50?
I don't see any way but I am hoping someone has a way around
it.
|
Sell Fund Y now for $50. If there were no reinvested
dividends, On schedule D, enter the acquired date as 199x
(date you bought X) and price ($100).
If there are reinvested dividends that had been used to buy
more stock, more than a year ago, then the basis will be
more than $100 by that amount. You will separate the
long-term and short term portions. You will enter the
acquired dates as "Various".
<< ======================================================= >>
<< 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 (2005) - All rights reserved. >>
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Shyster1040
Guest
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| Posted:
Fri Oct 21, 2005 8:00 am Post subject:
Re: Mergers between two funds |
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Speaking as a general matter (you haven't given enough facts
to reach an actual conclusion in your specific case), you
haven't lost any money yet.
As a tax matter, and again speaking in generalities, if the
merger was a valid nonrecognition event (it probably was,
otherwise you'd have gotten your losses), you don't
recognize gains or losses on the exchange of your X shares
for Y shares, and the aggregate cost basis you had in your
total X shares transfers to your total Y shares - i.e., in
terms of basis in a nonrecognition exchange, the value of
what you received does not (as a general matter) become your
basis. Thus, your loss, to the extent that the Y shares
have not appreciated in value, is still sitting around in
your Y shares. The basis transfers in the aggregate, not
necessarily on a share-by-share basis.
If you want to realize (and recognize) those losses, you
would generally just sell the Y shares, and take a loss to
the extent your original basis exceeds your amount received.
If you're really seriously considering doing this, you
should talk with your financial adviser first so that you
make sure whatever you do fits into your overall financial
plan - don't just act on the strength of my general comments
above.
<< ======================================================= >>
<< 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 (2005) - All rights reserved. >>
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Barry Margolin
Guest
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| Posted:
Fri Oct 21, 2005 8:00 am Post subject:
Re: Mergers between two funds |
|
|
nitinsane@gmail.com wrote:
| Quote: | Years ago (before the tech bubble burst) I had bought into a
high-flying technology fund X. Even though the price kept
falling, I did not sell the fund and was sitting on the
losses.
Along came a fund Y and converted my shares of fund X into
their fund at the market value at the time (around May '05).
I could have sold the fund X before the merger and booked
the losses which I would have been able to deduct.
Now, can I do anything as far as taxation is concerned,
about the money I really lost?? This would be my cost basis
in fund X and the total amount for which the fund Y
converted to their shares??
For example, my cost basis in fund X was $100. The price at
the time of merger was $50. That's what the worth I got the
shares of fund Y for. So, effectively I lost $50. Had I sold
fund X, I could have deducted $50 from other gains on my tax
returns. But Now, is there any way for me to be able to
deduct $50?
I don't see any way but I am hoping someone has a way around
it.
|
The merger was probably a tax-free exchange, so your basis
in Y is most likely your original basis in X. So unless Y
has doubled in price since May, you still have a capital
loss when you sell the Y shares.
--
Barry Margolin, barmar@alum.mit.edu
Arlington, MA
<< ======================================================= >>
<< 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 (2005) - All rights reserved. >>
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Rich Carreiro
Guest
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| Posted:
Fri Oct 21, 2005 8:00 am Post subject:
Re: Mergers between two funds |
|
|
nitinsane@gmail.com writes:
| Quote: | Along came a fund Y and converted my shares of fund X into
their fund at the market value at the time (around May '05).
I could have sold the fund X before the merger and booked
the losses which I would have been able to deduct.
Now, can I do anything as far as taxation is concerned,
about the money I really lost??
|
Sell your shares in Y.
| Quote: | This would be my cost basis
in fund X and the total amount for which the fund Y
converted to their shares??
|
Your basis in Y is your basis in X, assuming the merger was
a so-called "tax-free exchange", which it almost definitely
was.
| Quote: | For example, my cost basis in fund X was $100.
|
Which is now your basis in Y.
| Quote: | The price at the time of merger was $50.
|
Irrelevant.
| Quote: | That's what the worth I got the shares of fund Y for.
|
Irrelevant.
| Quote: | So, effectively I lost $50.
|
No, you lost $50 because the price of X dropped, not because
of the merger.
| Quote: | Had I sold fund X, I could have deducted $50 from other gains on my tax
returns. But Now, is there any way for me to be able to
deduct $50?
|
Sell fund Y.
--
Rich Carreiro rlcarr@animato.arlington.ma.us
<< ======================================================= >>
<< 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 (2005) - All rights reserved. >>
<< ======================================================= >> |
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Seth Breidbart
Guest
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| Posted:
Fri Oct 21, 2005 8:00 am Post subject:
Re: Mergers between two funds |
|
|
<nitinsane@gmail.com> wrote:
| Quote: | For example, my cost basis in fund X was $100. The price at
the time of merger was $50. That's what the worth I got the
shares of fund Y for. So, effectively I lost $50. Had I sold
fund X, I could have deducted $50 from other gains on my tax
returns. But Now, is there any way for me to be able to
deduct $50?
|
Sell Y.
(Interesting question: if he'd sold X just before the
merger, then bought Y after it, would that be considered a
wash sale? What if he bought Y before the merger?)
Seth
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
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<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
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Bruce E. Cobern
Guest
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| Posted:
Sun Oct 23, 2005 9:40 pm Post subject:
Re: Mergers between two funds |
|
|
<nitinsane@gmail.com> wrote:
| Quote: | For example, my cost basis in fund X was $100. The price at
the time of merger was $50. That's what the worth I got the
shares of fund Y for. So, effectively I lost $50. Had I sold
fund X, I could have deducted $50 from other gains on my tax
returns. But Now, is there any way for me to be able to
deduct $50?
I don't see any way but I am hoping someone has a way around
it.
|
One way or another, you still have the loss, either as an already
realized loss or an unrealized loss in your holdings in fund Y.
Usually this type of situation is a nontaxable exchange of shares
and your cost basis in X carries over to your holdings in Y.
Thus, using your numbers above as your total investment, since
you had invested $100 in your holding in X, your cost basis in
your holding in Y would remain $100, even though the value of Y
you received was only $50. If you were to turn around and sell Y
it would generate a loss of $50, which would be long or short
term depending on how long you had held all of your X shares
(presumably all long term, unless you had acquired some
additional X within a year of the sale of Y).
In some instances, the exchange is taxable and you would have a
realized gain or loss by comparing the value of what you received
($50) with your cost basis in what you gave up ($100), yielding a
$50 loss at the time of the exchange, long or short (or some of
each) depending on how long you had held each share of X.
While taxable exchanges are unusual in this type of situation,
they do occur. For example, the acquisition of Bankers Trust by
Deutschebank was taxable because the acquiring company was
foreign.
Either way, this transaction does not take away your loss.
--
Bruce E. Cobern, CPA
mailto:bec@pipeline.com
<< ======================================================= >>
<< 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 (2005) - All rights reserved. >>
<< ======================================================= >> |
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David Woods, EA, ChFC, CL
Guest
|
| Posted:
Wed Oct 26, 2005 8:00 am Post subject:
Re: Mergers between two funds |
|
|
"nitinsane@gmail.com" <nitinsane@gmail.com> wrote:
| Quote: | Years ago (before the tech bubble burst) I had bought into a
high-flying technology fund X. Even though the price kept
falling, I did not sell the fund and was sitting on the
losses.
Along came a fund Y and converted my shares of fund X into
their fund at the market value at the time (around May '05).
I could have sold the fund X before the merger and booked
the losses which I would have been able to deduct.
Now, can I do anything as far as taxation is concerned,
about the money I really lost?? This would be my cost basis
in fund X and the total amount for which the fund Y
converted to their shares??
For example, my cost basis in fund X was $100. The price at
the time of merger was $50. That's what the worth I got the
shares of fund Y for. So, effectively I lost $50. Had I sold
fund X, I could have deducted $50 from other gains on my tax
returns. But Now, is there any way for me to be able to
deduct $50?
I don't see any way but I am hoping someone has a way around
it.
|
You don't have a loss.
--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com
<< ======================================================= >>
<< 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 (2005) - All rights reserved. >>
<< ======================================================= >> |
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David Woods, EA, ChFC, CL
Guest
|
| Posted:
Thu Oct 27, 2005 8:00 am Post subject:
Re: Mergers between two funds |
|
|
"nitinsane@gmail.com" <nitinsane@gmail.com> wrote:
| Quote: | Years ago (before the tech bubble burst) I had bought into a
high-flying technology fund X. Even though the price kept
falling, I did not sell the fund and was sitting on the
losses.
Along came a fund Y and converted my shares of fund X into
their fund at the market value at the time (around May '05).
I could have sold the fund X before the merger and booked
the losses which I would have been able to deduct.
Now, can I do anything as far as taxation is concerned,
about the money I really lost?? This would be my cost basis
in fund X and the total amount for which the fund Y
converted to their shares??
For example, my cost basis in fund X was $100. The price at
the time of merger was $50. That's what the worth I got the
shares of fund Y for. So, effectively I lost $50. Had I sold
fund X, I could have deducted $50 from other gains on my tax
returns. But Now, is there any way for me to be able to
deduct $50?
I don't see any way but I am hoping someone has a way around
it.
|
You don't have a loss.
--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com
<< ======================================================= >>
<< 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 (2005) - All rights reserved. >>
<< ======================================================= >> |
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rick++
Guest
|
| Posted:
Fri Oct 28, 2005 8:00 am Post subject:
Re: Mergers between two funds |
|
|
You probably wont get a 1099B on this event. Only when you
trade it yourself. Name changes/ mergers happen regularly
in my fund family without 1099Bs.
<< ======================================================= >>
<< 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 (2005) - All rights reserved. >>
<< ======================================================= >> |
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