What happens to the stock when one company takes over another?

[Andre1969]

Hey gang, I had 50 shares of Pixar (PIXR) stock, and that company was recently acquired by Disney (DIS). For each share of PIXR I had, I now have 2.3 shares of DIS, or 115 total. Here's my question, though. The PIXR had made a pretty big jump in price during the time I had it. So when it comes time to pay my 2006 taxes, will I have to declare that PIXR gain as a capital gain? Or will that get deferred until I sell the DIS stock sometime down the road?

 

[brewer12345]

The company can tell you for sure, but these deals are almost always structured such that you don't have to pay cap gains until you sell the acquirer's stock. So if you want to hold DIS, you can likely defer paying the taxes.

 

[roadkill]

Andre1969......

In the situation you describe, you now simply own 115 shares of DIS with your cost basis equal to what you paid for PIXR. Once you sell the DIS, your gain will be computed on the PIXR cost basis......hope this helps.

 

[Spanky]

No capital gain until DIS is sold since it is a all-stock deal (no cash component).

 

[Andre1969]

cool! Thanks for the info, guys! I was a little worried, since my PIXR had shot up about 57% in value before converting to DIS. It'll be nice to put the tax consequences of that off for a bit.