Message Font: Serif | Sans-Serif
No. of Recommendations: 0
I've owned some shares of HBOC since May, but I'm not a fan of the recently announced merger with McKesson (MCK). So I want to liquidate my position. However, I am convinced that the merger will be completed successfully. So I was considering the following strategy, but I don't know the tax consequences. So any insights would be helpful.

For sake of argument, lets say I own 1000 shares. (I own an odd lot, but I want to keep this simple). Each share of HBOC will be converted into .37 shares of McKesson at the merger date.

So, instead of selling my HBOC shares, I short sell 370 McKesson shares. Then on the merger date in 1999, I will receive 370 shares of McKesson which I then use to cover my short sale.

Is there a phantom transaction that takes place on the merger date which determines what capital gains are allocated to the HBOC shares and what gains are allocated to the short sale?

Or would it just be easier to make two additional trades on (or close to) the merger date so that I have two simple buy/sell transactions I can account for.

Anybody know the answer?
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.