Stock Acquired Through a Consolidation or Transfer
Chapters in this video
- 0:00 Exchange ratios and the active shareholder exchange
- 1:53 Tax-free reorganization: substituted basis and tacked holding period
- 2:50 Boot math: gain recognized up to cash received
- 4:16 Registration versus shareholder vote under the reorganization rule
- 5:24 Spinoff versus merger: basis split versus basis substitution
- 6:19 Rapid-fire exam recap
What this video covers
- How exchange ratios work in a merger or consolidation, and why the shareholder actively hands in old shares rather than passively receiving new ones
- What a qualifying tax-free reorganization does to gain recognition, cost basis, and holding period
- How boot (cash or other property) triggers partial gain recognition up to the boot amount, with the remainder deferred through adjusted basis
- Why losses are never recognized in a reorganization exchange, even when boot is received
- What the reorganization rule mandates (registration of new securities) versus what state corporate law or the charter mandates (shareholder vote)
- How spinoffs and mergers compare on direction, shareholder action, basis treatment, holding period, and loss recognition
- The four scenarios where the reorganization rule applies: mergers, consolidations, reclassifications, and asset transfers
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