stock buyback over 2 years

[thomtax]

Client situation:

Held shares in company B. Company A took over Company B using stock swap and cash premium payment. Client chose to take a buyout of the company A stock. In order to do this, they had to submit the stock to company A. In doing this they ended up with the following situation. Company A paid the premium over the stock value during 2009. However, by the time everything was set up for the completion of the buyback, it was 2010 before the additional moneys were paid out.

Naturally I want to handle this in the best way, taxwise for the client. I'm open to suggestions as to best way to do so.

As usual, thanks to all for thoughts.

LT

[Burke]

Would not this be handled as a sale? Form 1099-B produced? Report in whatever year they do.

[thomtax]

Would not this be handled as a sale? Form 1099-S produced? Report in whatever year they do.

Yes, it is a stock sale. My quandry is that part of the payment received for the sale was in 2009 and part of it was in 2010. This then brings up how to best handle basis for the sale.

One of my thoughts is to take the two amounts received and then figure what the percentage received in 2009 calculates to. Then I would apply this percentage rate times the total basis. I know that this is probably not correct, but it would get it distributed equitably. I at home now and don't have access to see if it is allowed to have the stock on installment sale.

LT

[JON]

Why not

installment sale?

[Burke]

Yes, it is a stock sale. My quandry is that part of the payment received for the sale was in 2009 and part of it was in 2010. This then brings up how to best handle basis for the sale.LT

Well, there still remains the situation of the 1099-B or 1099-CAP. Did they send the TP one for 2009? If not, are they going to report all in 2010? This is the quandary you will have to deal with, to match what the IRS has. [PUB. 17: You cannot use the installment method to report a gain from the sale of stock or securities traded on an established securities market. You must report the entire gain in the year of sale (the year in which the trade date occurs.)] Whether that would apply in a buyout by a public company itself which normally trades on the open market, I am not sure.