Protective Calim and Fisher Case

[Kram BergGold]

In TTB page 6-10 it talks about filing a protective extension.
At this time it appears the court is waiting till after April 15 to rule which leads me to beleive Fisher is going to win.
I have two clients who sold demutualized shares in 2004. When I make the claim, do I use the sale price as the basis thus resulting in a zero gain?

[KBTS]

I have a client in the same situation and was wondering the same thing. I have researched this and could not find a definitive answer. Maybe someone here can help. Guess since it is just a protective claim anyways, it might not matter since you would file the actual amended return if Fisher wins.

[Bees Knees]

http://www.uscfc.uscourts.gov/

A link to the US Court of Federal Claims, where the case originated. Any new developments will show up there. Do a search on the case name.

[Kram BergGold]

Bees?

I found an authoritative site which said what I felt, that a ruling is not coming down till after 4/15/08. So when I work the numbers might the basis be different than the sale price? If so, does it negate the claim if I go with zero gain for the protective extension and then adjust it later when I find out the correct amount to use?

[Bees Knees]

Well, if you are going to file a protective claim based upon that court case, you need to read the court case and follow the logic the taxpayer used in trying to claim a refund. I haven’t read or studied the case, but in glancing at the issue it appears the taxpayer sold the stock at the time of the demutualization and is claiming no gain or loss should have been recognized since the fair market value at the time of demutualization would have been the same as the sale price.

Each case could be different depending upon your circumstances. If your client has the identical situation, then follow the case. If the sale occurred at a different time, basis is not going to be the same as the sale price. So I would file the claim based on what you believe should be the correct basis, even if your situation is not identical to the case. You can still use the logic of the case to determine what you believe should be the correct basis.