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I own 1416 shares of Anadarko Petroleum. Anadarko management deems that Occidental Petroleum's offer of $59.00 and .2496 Occidental shares per Anadarko share is the best offer for its shareholders.

How would the cash received in this merger be treated for tax purposes?

Receiving $59.00 per share would exceed my current investment in Anadarko; however, if I price the .2496 Occidental shares at their current market price, the value of the transaction is roughly equal to the current market value of my Anadarko holdings.

Is the cash received regarded as a return of capital reducing the cost basis of the Occidental shares that I receive with capital gains/losses being determined when I eventually sell the Occidental shares?
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