5

This is the scenario.

Say I buy some shares of a company X at a certain value. Some time after this, when I am still holding the stock, the company gets acquired by some company Y and as part of that deal, instead of receiving shares in company Y, I get a certain amount of cash for each share I hold.

If this amount per share is greater than the initial value I bought the shares at, will this get taxed as capital gain?

Note: I live in the UK, but this is for a US stock held with a US broker.

  • You are the owner, in the UK. I believe my US advice would be useless. For us, it's exactly the same as if you sold the shares, as that's sort of what happened. – JoeTaxpayer Mar 16 '13 at 23:33
  • @Joe not useless, but insufficient. the OP is subject to both the US and the UK taxation, and the US-UK tax treaty, all of which are relevant. – littleadv Mar 17 '13 at 0:33
  • That right? I've bought and sold ADRs of stocks of foreign companies and never gave it a second thought. – JoeTaxpayer Mar 17 '13 at 1:03
  • buying ADR's of foreign stocks on a US exchange is not the same as buying the same very foreign stocks on their home exchange. – littleadv Mar 17 '13 at 2:05
3

In the US this is considered a sale, and the proceeds will be taxed as if you've sold the stocks in any other way. The decision about the treatment (capital, ordinary, etc) is dependent on what kind of stock that is, how you acquired it, how long have you held it, etc. If it is a regular stock that you bought as an investment and held it for more than a year - then it will likely to be a capital gain treatment.

However, this is only relevant for the US taxation. Since you're a UK person, you should also check how it is handled in the UK, which may or may not be different.

  • I'd appreciate a comment on the downvote though – littleadv Mar 17 '13 at 7:11
  • Didn't come from me, I think it's a good answer :) – Alex Florescu Mar 17 '13 at 9:35
  • UK's handling basically the same; some good information at gov.uk/guidance/… ; any conversion of shares to cash triggers a capital event, while shares-to-shares deals don't. – timday Dec 17 '15 at 22:27

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