Selling Prudential demutualization stock

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Subject Author Date Selling Prudential demutualization stock gindie 08-26-2009  Re: Selling Prudential demutualization stock Alan 08-26-2009  Re: Selling Prudential demutualization stock Avrum Lapin 08-26-2009
Posted by gindie on August 26, 2009, 2:39 am Please log in for more thread options Almost 1 year ago, a US Tax Court ruled against the IRS and declared that the stock gained through demutualization retained its IPO basis ($27.50) rather than the 0 as the IRS had claimed. However, as I understand it, the IRS can appeal the decision. If you were doing a Schedule D today, would you choose the $27.50 or be safe with $0 for the basis? What would need to happen if someone chose the $27.50 and the IRS later (possibly several years later) won the appeal? -- << ------------------------------------------------------- >> << 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. >> << ------------------------------------------------------- >> Posted by Alan on August 26, 2009, 12:45 pm Please log in for more thread options gindie wrote: > Almost 1 year ago, a US Tax Court ruled against the IRS and declared > that the stock gained through demutualization retained its IPO basis > ($27.50) rather than the 0 as the IRS had claimed. However, as I > understand it, the IRS can appeal the decision. > > If you were doing a Schedule D today, would you choose the $27.50 or > be safe with $0 for the basis? > > What would need to happen if someone chose the $27.50 and the IRS > later (possibly several years later) won the appeal? > The actual case (Fisher vs US) was a US Court of Claims decision. The best analysis of this decision that I have seen is by Ed Zollars, CPA. You can find it at: http://www.edzollars.com/2008-08-18_OpenTrans.pdf You can find the case by going to the website for the US Court of Claims and searching for 2008 decisions by Judge Allegra. It is not clear that the decision would hold up for other demutualizations where the set of facts were different as this case was decided on the specific set of facts. What is clear, is that the IRS presumption of zero basis was not correct. What is also clear, is that basis would need to be allocated between the policy and the shares. Read Ed's document for a better understanding. -- << ------------------------------------------------------- >> << 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. >> << ------------------------------------------------------- >> Posted by Avrum Lapin on August 26, 2009, 3:37 pm Please log in for more thread options > gindie wrote: > > Almost 1 year ago, a US Tax Court ruled against the IRS and declared > > that the stock gained through demutualization retained its IPO basis > > ($27.50) rather than the 0 as the IRS had claimed. However, as I > > understand it, the IRS can appeal the decision. > > > > If you were doing a Schedule D today, would you choose the $27.50 or > > be safe with $0 for the basis? > > > > What would need to happen if someone chose the $27.50 and the IRS > > later (possibly several years later) won the appeal? > > > The actual case (Fisher vs US) was a US Court of Claims decision. > The best analysis of this decision that I have seen is by Ed > Zollars, CPA. You can find it at: > http://www.edzollars.com/2008-08-18_OpenTrans.pdf > Ed's document was a very understandable explanation as to how we got to where we are. For what ever it is worth, the IRS accepted (universal sample of 1) a 1040X with the basis changed from 0 to $27.50 and paid the calculated refund. -- << ------------------------------------------------------- >> << 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. >> << ------------------------------------------------------- >> Similar Threads Posted demutualization September 1, 2008, 7:52 pm Demutualization (Fisher vs U.S.) October 26, 2009, 11:23 am Demutualization - this year's taxes September 12, 2008, 10:58 pm Lone Accountant wins upset over IRS regarding Demutualization August 25, 2008, 8:14 pm LLC and "selling shares" tax information January 19, 2007, 8:25 pm Selling a house at a lose. 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