ADESA, Inc merger

[Jesse]

ADESSA, Inc merged with KAR Holdings, Inc and stockholders received cash merger proceeds of $27.85 per share. My client had 1,000 shares and received a check in April for almost $28,000.

If the original stock was purchased in 1986 would this be a long term capital gain? If not how would you treat the cash merger proceeds received?

[jimmcg]

Absent other facts, cash received for shares in a corporate reorg that meet the long term holding period requirements would be treated as long term capital gains or losses as the case might be.

[FEDUKE404]

Looks like LTCG

I'm not familiar with Adessa, but it appears through some rudimentary research that it was an all-cash deal.

If so, the cost basis/holding period goes back to the original Adessa stock. (Things can get complicated where a cash and stock deal occurs, but this does not appear to be the case here.)

I did note that there was an event with Allete where Adesa stock was involved in an earlier spin-off (2004?). IF that is the case, then there is a basis allocation necessary between the two companies (60%/40%).

This link might help, if needed:

http://images.adesainc.com/publicweb/Investor/AdesaAlleteSpinOffRevised.pdf

FE

[Davc]

As long as there are no reinvested dividends holding period goes back to the original stock regardless of whether or not it's an all cash deal.

[FEDUKE404]

Holding period is just one factor

As long as there are no reinvested dividends holding period goes back to the original stock regardless of whether or not it's an all cash deal.

I thought that is what I already said.......or at least meant to say!

The point I intended to make is that more calculations, irrespective of anything related to the underlying holding period, may be required to determine what is and what is not taxed when a cash + stock deal transpires.

The original post by Jesse left that door open....

FE