Jared,Companies are usually bought out at a premium to what they are trading at in the market. A rough average I believe is somewhere around a 20% premium to the market price. If there are buyout rumors (as opposed to an actual offer at a disclosed price per share) the inferred "buyout premium" is a likely reason why shares are trading higher on the news.When one company buys another company it might use cash, shares, or a combination of cash and shares to fund the purchase. If the company uses cash, your shares will be bought out and exchanged for cash and the transaction will look very similar to just having sold the shares yourself. If the company uses shares, your current shares of the acquired company will get exchanged for shares in the acquiring company. If the acquiring company uses a combination of cash and shares then you'll end up with some shares of the acquiring company as well as some cash.If this happens in a taxable account you might have some current-year tax issues to worry about. If you get bought out for cash you now have a realized short or long term capital gain depending on how long you've held the shares. If it's a stock swap it probably is a tax-free transaction though you'll need to keep track of your cost basis for the new shares for when you do eventually sell. Verify with the acquiring/acquired company's investor relations contact about what your cost basis in the new shares should be and whether or not there are any current-year tax obligations due to the acquisition. You never want to infer when it comes to the IRS!Mike
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