In a shareholder's derivative litigation I have the following statement of the financial situation which this case arises from:
"Plaintiffs contend that if the company were to sell the purchased stock on the market, it would sustain a capital loss of $25 million which could be offset against taxable capital gains on other investments. Such a sale, Plaintiffs allege, would result in tax-savings to the company of approximately $8 million, which would not be available if the purchased stock were distributed to the shareholders."
- Note that the company's board of directors had previously made a statement announcing a special divided which would distribute the purchased stock amongst the shareholders. It is presumably this dividend to which Plaintiffs are objecting to.
First, what does it mean to be "offset against taxable capital gains"?
Second, the Plaintiffs want the board of directors to RESCIND the previous statement announcing a special divided. They want the stock to be sold (which would result in a $25 million loss). Why do they want the stock to be sold even if it would sustain a loss?