# Tax implications of merger - am I req to take a cap gain?



## d0rian (May 28, 2015)

In 2013, I bought 600 shares of Lorillard (LO), cost basis $29,000. It's value had risen to ~$42,800 as of 2 weeks ago.

Last week, it merged / got acquired by Reynolds, and per the terms of the merger, i received -- for every share of LO -- $50.50 in cash. and 0.2909 shares of RAI. So I got:
i) 174 shares of RAI (stock price = ~$72, so value of stock I got was ~$12,500), and 
ii) $30,300 cash. 

- What's the correct CRA tax treatment?
- Do I have to declare a capital gain (of ~$13.8K) on the 'disposition' of the LO even though I never really wanted to dispose of it?
- What's the cost basis for the shares of RAI I now own?


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## Eclectic12 (Oct 20, 2010)

Anytime I've had a second company acquire the first that I own, the broker sends a letter outlining whether it can be tax deferred (i.e. cost base rolls over to new shares) and if any instructions are required.

The other place to check is the web site for the company that bought (i.e. second company) as they usually post notes about what they are trying to arrange.


If there is not tax deferred rollover ... you have to report/pay the capital gains as if you sold the shares. That also becomes the price for the ACB of the new shares received.



Cheers


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## d0rian (May 28, 2015)

OK, thanks i'll check. Tho these are 2 american companies so...even if they post a note on their website, i can't imagine they'd explain tax treatment for int'l countries...what, would they say "here's how to treat it in the US, here's instructions for canada, here's saudi arabia, etc"


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## Eclectic12 (Oct 20, 2010)

Canada and the US have a lot of cross-border investors so it may be there. 

I know for some Canadian company buyouts in the past I've seen notes for "Canadian investors" and "American investors" providing direction. I haven't checked US company sites though.


The good news is that if the transaction closed in 2015, you have until the tax deadline in 2016 to followup. 

Worst case, I doubt CRA would be upset if you had the choice of a tax deferred rollover but instead reported a CG. :biggrin:


*PS*

Don't forget to check if you have a CL or can sell something to generate one that would cancel out the CG ... if it ends up being a taxable event.


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