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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: Re: Installment Sale Date: 3/18/2000 1:03 PM
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<<I posted this a couple of days ago but am taking the liberty of trying again as I didn't get any replies. Can anyone help or give me some pointers? Thanks.>>

Since I'm working backwards, I don't know if this was answered or not. But I'll take your word for it.

<<In 1998 my employer was bought by a larger company. The stock options we held were bought out and we received some money then, and some was held in escrow for one year (subject to some conditions).>>

You use the term "stock options" loosely, it appears. I don't know exactly what you have. Which makes it difficult to know how it might be treated for tax purposes.

As you should know, stock "options" could include any number of things, ISOs, NQs, etc. So what I would first suggest is that you visit the Fairmark Tax Site (http://www.fairmark.com) and try to determine what you really have. Kaye Thomas also has message folders that you might want to use to post your question.

<< We received the second part of the money in 1999. I treated this as a simple Installment Sale as I knew how much the second installment would be. Both qualified as long term capital gains.>>

I can only assume that you knew what you were doing, and you did it correctly. But, did you know that stock traded on a recognized stock exchange are not available for installment sale treatment? Just one of the points and pitfalls of using installment sales. I don't know if YOUR stock is traded or not...just thought I point this out.

<<Some additional money was also put in escrow as an expenses fund. What was left was shared pro-rata among the original stock option holders in 1999. I received a 1099-B describing the extra money as 'Acquisition Proceeds'. How should this extra money be taxed???>>

No clue. If it applies to the original sale, it would appear to be an additional payment. Since you have already used up your basis in the prior installment sale, this additional payment would have no basis, and would all be taxable. That's my best GUESS.

<<Is the new money LONG term capital gains as the original money was?>>

Again, I would GUESS long term...since it was tied to the original sale.

<<How do I include it on my 1040?>>

I would GUESS on Schedule D.

Isn't your new company helping you out with this transaction? I guess my first questions would be directed to THEM.

Sorry I can't be more definite.
TMF Taxes
Roy
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