Question: Company Acquisition

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
chris319
Posts: 1659
Joined: Thu Jan 28, 2021 5:04 pm

Question: Company Acquisition

Post by chris319 »

Oh, the joys of owning individual stocks.

I own shares of JMP which is about to be acquired by Citizens Financial Group. The notification shareholders received states this:
Upon completion of the merger, each common share of JMP will be converted into the right to receive cash consideration of $7.50
per common share.
Note that I will have the right to receive cash compensation. I assume this means I can opt not to receive it. If after the merger I receive shares of CFG, I'm OK with that. Or, I can opt for the $7.50 per share cash consideration.

My question is, if I opt for the cash consideration, would that be considered a taxable event and thus subject to tax? I suspect it would be. Needless to say I am loathe to pay any more tax than I have to. My basis in JMP is $6.79, so the $7.50 they're offering would represent a gain for me, thus my inference that it would be taxable.

Thank you.
Financial decisions based on emotion often turn out to be bad decisions.
jebmke
Posts: 25476
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Question: Company Acquisition

Post by jebmke »

Cash would normally be considered taxable. The proxy should provide some indication of their view on taxation although some of them are fairly non-committal and simply say "consult your tax advisor."

I have a handful of legacy investments like this; when one gets bought out I quickly donate it to our Donor Advised Fund before the close so I avoid the tax - and take the deduction on that year's taxes.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Topic Author
chris319
Posts: 1659
Joined: Thu Jan 28, 2021 5:04 pm

Re: Question: Company Acquisition

Post by chris319 »

Thanks for the quick reply.

Could you elaborate on this part? I'm not familiar with a Donor Advised Fund.
when one gets bought out I quickly donate it to our Donor Advised Fund before the close so I avoid the tax - and take the deduction on that year's taxes.
Financial decisions based on emotion often turn out to be bad decisions.
increment
Posts: 1736
Joined: Tue May 15, 2018 2:20 pm

Re: Question: Company Acquisition

Post by increment »

chris319 wrote: Tue Oct 26, 2021 10:22 am
Upon completion of the merger, each common share of JMP will be converted into the right to receive cash consideration of $7.50
per common share.
Note that I will have the right to receive cash compensation. I assume this means I can opt not to receive it. If after the merger I receive shares of CFG, I'm OK with that. Or, I can opt for the $7.50 per share cash consideration.

My question is, if I opt for the cash consideration, would that be considered a taxable event and thus subject to tax?
Uh, Citizens calls this an all-cash transaction, so it sounds like the alternative to receiving your cash consideration is to surrender your shares in exchange for nothing. They are buying the stock from you so of course it is a taxable event.
Last edited by increment on Tue Oct 26, 2021 10:44 am, edited 1 time in total.
jebmke
Posts: 25476
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Question: Company Acquisition

Post by jebmke »

chris319 wrote: Tue Oct 26, 2021 10:34 am Thanks for the quick reply.

Could you elaborate on this part? I'm not familiar with a Donor Advised Fund.
when one gets bought out I quickly donate it to our Donor Advised Fund before the close so I avoid the tax - and take the deduction on that year's taxes.
I'd suggest reading this Wiki entry and then if you have specific questions post them back here.

https://www.bogleheads.org/wiki/Donor_advised_fund

Note, you could also simply donate it directly to a charity and skip the DAF.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Topic Author
chris319
Posts: 1659
Joined: Thu Jan 28, 2021 5:04 pm

Re: Question: Company Acquisition

Post by chris319 »

Citizens calls this an all-cash transaction, so it sounds like the alternative to receiving your cash consideration is to surrender your shares in exchange for nothing. They are buying the stock from you so of course it is a taxable event.
Thanks for digging into this.

It looks like my Federal CG tax liability would be about $303, still a profitable position.
Financial decisions based on emotion often turn out to be bad decisions.
Post Reply