Fischer case decided

[Burke]

The proceeds on demutual. were $34,000 and the court said basis was $34,000.

I am interpreting this to mean the stock's basis was its FMV value on the date issued, and not based on his premiums paid.

[tpnl]

New question to this issue

My client sold his Prudential stock in 2008. If I add up all the premium his paid it equals $18,461.

From what I read, I should use as basis $29.90 per share or total premium? In my clients case it would be the $29.90 per share.

This will cause a loss. Can you have a loss on demutualization or just no gain?

(If I used premiums paid it would be a huge loss)

[Nashville]

Sluggo

Roland, been awhile, and good to have your knowledgeable input back. Burke, the exemption for policy "dividends" should be a separate matter - they were a rip-off to begin with and IRS for years took the position that the "dividends" were really of no economic consequence. Now all of a sudden, these taxpayers are supposed to have their stock basis impacted by these phony dividends? Disagree adamantly here.

Also, politicians every now and then pass these "Taxpayer's Bill of Rights." We all know that behind their smiling faces, these are facades, and very little of anything protects the taxpayer from the real abuses. This matter of refusal to acquiesce is one of the worst consequences of the heavy hand. They know they've got a loser and simply don't want justice to be done.

The next smiling politician who trumpets a new "Taxpayer's Bill of Rights" should make sure that IRS has to PAY on a court decision, and if they want to drag it out for another 10 years in appeals, they should have to reimburse each petitioner their legal costs if court decision has already occurred. Then if they win, they collect. But at least this would stop this blatant abuse.

[Burke]

Some years back, the IRS ruled that cash surrenders of life insurance policies could produce a taxable gain. The calculation was (basically) if you got back more than you paid in, less the cost of insurance, there was a taxable gain reported to the IRS and policyholder by the insurance company. So, with this new ruling, suppose you do use your premiums (net) paid in as a basis when you sell the stock, then it is reasonable to assume that should you cash in the contract in the future, you may have very little or no basis to be applied against the proceeds received, and it would all be taxable. Who is going to track this? The taxpayer/policyholder? The tax preparer? LOL. What if you have already cashed in the policy a while back, but you still have the stock? Your premiums have already been used to offset the taxable part of any gain on the cash surrender, so there is nothing to use now, IMO. What a headache.

[Burke]

[QUOTE=tpnl;74545]This will cause a loss. Can you have a loss on demutualization or just no gain?/QUOTE]

It is a sale of stock, so you can have either a loss or a gain if you can prove your basis.

[veritas]

Your scaring me

I think the agent who initailly did you wrong was the one who talked you into buying the whole life policies to begin with. Too bad you can't sue HIM...

We might be related.