I own shares of company A in a personal, non-tax advantaged account. Company A is being acquired by company B at a premium in an all cash deal, but I'd like to avoid the taxes associated with selling stocks if possible.
How can this be done?
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1Can't you keep your shares and not sell?– Vilx-Jan 19 at 18:38
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1@Vilx- No, that's what an "all cash buyout" is. Any shares you hold in an investment account in such a company on the settlement date (which, if this is Activision/MSFT, won't be until next year sometime) are converted to their equivalent cash value per the buyout agreement and the shares disappear. There would have been a shareholder vote prior to the deal where shareholders can elect to support or reject the deal, but if a majority vote to sell then everyone has to sell - there is no choice.– J...Jan 19 at 20:33
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1@J... - That's weird. How can someone force me to sell something I own? Doesn't that go against some basic human rights or constitution or something? Well, I guess there are laws that support it. But man, investing is weird.– Vilx-Jan 19 at 21:00
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4@Vilx- That sounds like it deserves an entire separate question.– BrilliandJan 19 at 21:11
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2@Vilx - As a shareholder, you own a percentage of the company but you do not own any of the physical assets nor do you have any direct control over how the company is run. At best, you may have voting rights for electing the board of directors members who in turn hires upper management. If the BOD decides to sell the company, in a merger, your shares are converted into the buyer's shares. If it's a cash buy out, you receive cash. There are no basic human rights being violated here.– Bob BaerkerJan 19 at 23:25
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2 Answers
US centric answer:
An all-cash deal is a sale so there is no way to avoid taxes when there's a cash buy out of a position in a non-sheltered account.
answered Jan 18 at 16:19
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9OP hasn't told us explicitly, but this is probably the ATVI/MSFT deal. In that case it won't settle until next year, likely, so one strategy here, depending, might be to start selling some of the shares early if the price is reasonable. That way, at least, you can spread the damage over two tax years and maybe limit it somewhat depending what OP's bracket and deduction situation is. Depends on how long OP has held the shares for, also.– J...Jan 19 at 21:36
The accepted answer is right, in that a cash acquisition is in effect a forced sale for cash, so gains are realized and recognized and hence taxable. But if you really want to defer paying taxes on the gain, there are options. For example qualified opportunity funds, discussed by IRS here and Kiplinger here. Note that you much be a qualified investor. I know this probably should be a comment but I am new to this particular Stack Exchange and don't have the reputation required for a comment.
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these won't help though in this situation since the OP is already invested. There are a lot of investment options with tax deferral component (e.g.: Real estate), but there's no point listing them for the OP who has a specific situation Jan 20 at 16:53
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1Did read the links? You must not have have because the explicit design of the QOZ provision created in 2017 is to allow deferral of realized capital gains to encourage investment in those areas. So it's not "no point," it is the point. Jan 20 at 19:34
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