Involuntary Conversion of Stock

[Nashville]

We have situations called "involuntary conversions" such as condemnations, casualties, etc. The theory is that the taxpayer was not in control of disposal, so therefore he should not have to pay on gains. The former basis is "rolled into" the basis of the new property such that the gain is effectively postponed until the next disposition.

Now, more so than ever, the phenomenon of "involuntary conversion" is occurring in the arena of privatized stock buyouts. In spite of the pre-emptive nature of common stock, regulators have allowed these private buyouts to steamroll minority stockholders out of existence with cash offers.

"Cash offers" are the key. If these old shareholders were offerred common stock of the new company, the tax basis of the old stock would flow to the new stock. Since cash is cash and not stock, then a gain/loss is necessary.

My question is: Is there an allowance for deferral of gains due to involuntary conversion which has resulted from a stock sale??

[Burke]

Not in my experience. Interesting concept, however, might be worth pitching to your local congresspersons.

[FEDUKE404]

That dog won't hunt!

I seriously doubt it, as you are at the mercy of the BOD of the company and (at least in theory) received "adequate" compensation for your shares.

Sometimes it is money, and sometimes it is stock. And then sometimes it is nothing (ask the Idearc people about that one!).

But - good try!!

FE