The majority of stock mergers are tax-free, except for the "cash in lieu" payment paid for fractional shares.
Many brokerage firms simply list the "cash in lieu" payment (often denoted as CIL) as sales proceeds with no cost basis allocated to it. You end up paying tax on the entire cash payment, even though you have basis you are entitled to claim.
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On several recent bank mergers,
failure to claim basis on "cash in lieu"
payments results in higher taxes owed.
For instance, on the Wachovia
merger with Wells Fargo, a typical
cash in lieu payment might be
$25, but the cost basis that could
be allocated to the fractional share
might be $186 or more based on
stock prices earlier in 2008. Instead
of paying tax on $25, you could claim a
loss of $161 against your other income
if you make the effort to report your
cost basis!
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Click on the image below
to access our
stock merger calculator.
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| Stock Merger Calculator |
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The calculator has been pre-filled
with data on recent stock mergers.
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"Confidence is the basis of all finance."
--Stuyvesant Fish
President, Illinois Central Railroad
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In using this calculator, make sure
that the cash you received was for
cash in lieu of fractional shares and
that you are not in fact looking at
a "cash to boot" transaction.
If you know of other stock mergers,
please help us build our database for
the benefit of all users. Please send
us the details so that we can add it to
the table of pre-filled values in the
merger calculator.
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