|
Posted by Alan on August 12, 2008, 3:15 pm
Please log in for more thread options
Dick Adams wrote:
>> Alan wrote:
>
>>> This decision ruled for the taxpayer on the sale of shares
>>> obtained in a demutualization of an insurance company.
>>>
>>> There is an article in Monday's Wall St. Journal page C3.
>>>
>>> http://www.uscfc.uscourts.gov/sites/default/files/ALLEGRA.Fisher080608.pdf
>
>> I should have added that this case was argued by Burgess J. W.
>> Raby, a highly respected tax attorney.
>
> Two points of interest:
> 1. This case is applicable if and only if the taxpayer took
> cash instead of stock by having the company sell his
> shares at the IPO for the initial IPO asking price.
>
> 2. The IRS attempted to use a PLR in its defense. Of course
> the judge caught this and mocked them for it. <G>
>
> Nice case. ;)
>
> Dick
>
Your point one does not hold up. The stockholder was issued
shares in the company and elected to offer those shares to the
public as part of the initial offering. I don't think it would
matter whether or not he kept the shares and sold them later. The
issue here was how one derives cost basis of an asset when the
value is not discernible. In this instance, the value of the
ownership rights. The judge decided that the "open transaction"
exception to the treasury regulation was applicable and that the
IRS experts were plain wrong in deciding that the value was zero,
especially given the insurance company documents that were issued
to the stockholders.
The issues on the table are: how is the IRS going to react to the
ruling; and how is the cost basis for others in this situation
going to be determined.
Either way, it is in the best interest of all practicing tax
preparers to file refund claims (assuming the amount in question
justifies the cost) for those clients who paid tax on
demutualization shares since 2004.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
| 
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap