Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
Thanks for pointing out that this merger will trigger a taxable stock sale. I hold some shares of AMAT with a nice long-term capital gain. I can deal with the "forced" sale that will occur due to the merger leaving me with new shares of HoldCo. If I'm interpreting correctly the text below, the only downside is that my long-term position will be converted to a short-term position for tax purposes, with the new cost basis stepped up to the date of the merger.

Are there additional taxes in this situation that I may not be aware of? That might make me want to liquidate before the merger; otherwise, it seems relatively neutral for a long-term buy-and-hold investor.

NR

-------------------------------

Relevant text from Form S-4:

Material U.S. Federal Income Tax Consequences of the Applied Merger to Holders of Applied Common Stock

U.S. Holders

The receipt of HoldCo ordinary shares for shares of Applied common stock pursuant to the Applied Merger will be taxable to U.S. holders for U.S. federal income tax purposes. Similarly, the receipt of cash for shares of Applied common stock (1) by any dissenters who exercise appraisal rights or (2) by stockholders who would otherwise receive fractional shares, will be taxable for U.S. federal income tax purposes. As a result, a U.S. holder should recognize gain or loss equal to the difference, if any, between (1) the sum of the fair market value of the HoldCo ordinary shares at the time of the Applied Merger and the amount of any cash received, and (2) the U.S. holder’s tax basis in the shares of Applied common stock surrendered in the exchange at the time of the Applied Merger. A U.S. holder’s tax basis in the shares of Applied common stock generally will equal the holder’s purchase price for such shares.

A U.S. holder’s gain or loss on the receipt of HoldCo ordinary shares and cash (if any) for shares of Applied common stock generally will be capital gain or loss. Capital gains of non-corporate U.S. holders will be eligible for the preferential U.S. federal income tax rates applicable to long-term capital gains if the U.S. holder has held his or her shares of Applied common stock for more than one year at the effective date of the Applied Merger. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by a U.S. holder will generally be treated as U.S. source gain or loss. If a U.S. holder acquired different blocks of shares of Applied common stock at different times or different prices, such U.S. holder must determine its tax basis and holding period separately with respect to each block of Applied shares.

If a U.S. holder of Applied common stock also owns, actually or constructively, a percentage of TEL’s common stock that is equal to or greater than the percentage of Applied’s common stock that the U.S. holder owns, actually or constructively, it is possible that such U.S. holder may be required to recognize an amount of income as a result of the Applied Merger up to the full fair market value of the HoldCo ordinary shares to be received by the U.S. holder, without regard to the U.S. holder’s basis in the shares of Applied common stock exchanged therefor, and that such income may be treated as ordinary dividend income and not as capital gain. Any such U.S. holders of shares of Applied common stock should consult their own tax advisors concerning the U.S. tax consequences to them of the Business Combination.

A U.S. holder will have an aggregate tax basis in the HoldCo ordinary shares received in the Applied Merger that is equal to the fair market value of the HoldCo ordinary shares as of the effective date of the Applied Merger, and the holding period of such HoldCo ordinary shares will begin on the day after the Applied Merger becomes effective.

Information returns may be filed with the IRS in connection with the Applied Merger. Backup withholding may apply to cash paid in the transaction to a U.S. holder (currently, at a rate of 28%), unless the U.S. holder furnishes a correct taxpayer identification number and certifies that he or she is not subject to backup withholding, typically on IRS Form W-9. Any amount withheld under the backup withholding rules will be allowed as a refund or credit against U.S. federal income tax liability, so long as the required information is timely furnished to the IRS.

U.S. holders are urged to consult their own tax advisors as to the particular consequences to them of the exchange of shares of Applied common
Print the post  

Announcements

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.