Discussion in 'The Archives' started by michael, Apr 25, 2003.
Can anyone shed any light on how this OPL liquidation distribution is going to be taxed?
As ordinary income. It's viewed the same as a dividend.
I'm not sure that that is true. I believe that the difference between your cost basis and what you receive is taxable. I also think its taxable at capital gains rate.
I think that unless your basis is over $2 per share, there are no taxes due yet.
Not 100% sure on this....
I got this a few weeks ago. Not sure if its accurate but it may help.
Liquidating Distributions are rare and are a return on your investment. Your key document will be the Stock Holding Report shareowners should have that details the original cost basis, purchase date and number of shares purchased. You will have to keep very detailed records going forward until the final liquidation distribution occurs.
Generally, the tax treatment for the individual will be as follows:
NOTE: LTG - Long term Capital Gain
LTL - Long term Capital Loss
Let's assume John owns OPL stock with the following basis (note this is for illustration purposes only, the value is not representative of OPL's actual cost at that date).
Date Cost Shares Total Cost
1/1/86 0.25 25 shares $6.25
1/1/90 2.00 50 shares $100.00
1/1/95 10.00 75 shares $750.00
1/1/96 17.00 100 shares $1,700.00
On 3/03, John received $500 (2 x 250 shares owned)
John has to allocate by shares:
$50 to 1/1/86 block of stock
$100 to 1/1/90 block of stock
$150 to 1/1/95 block of stock
$200 to 1/1/96 block of stock.
The outcome of the allocation is:
1/1/86 block of stock, $1.75 LTG/share or 1.75 x 25 = $43.75 LTG reported on Sch D of his return with a resulting -0- basis for the 25 shares. 1/1/90 block of stock, -0- LTG/share, -0- basis/share ($2.00 basis - $2.00 liquidating distribution) = 0 for the 50 shares. 1/1/95 block of stock, -0- LTG/share, $8.00 basis/share ($10.00 basis - $2.00 liquidating distribution) = $600 for the 75 shares 1/1/96 block of stock, -0- LTG/share, $15.00 basis/share ($17.00 basis - $2.00 liquidating distribution) = $1500.00 for the 100 shares.
Let's pretend that on 3/04, John receives $500 (2 x 250 shares owned) #2 liquidating distribution from OPL. The outcome of the allocation is:
1/1/86 block of stock, $2.00 LTG/share or 2.00 x 25 = $50.00 LTG reported on Sch D of his return with a resulting -0- basis for the 25 shares. 1/1/90 block of stock, $2.00- LTG/share or 2.00 x 50 = $100.00 LTG reported on Sch D of his return with a resulting -0- basis/share = 0 for the 50 shares. 1/1/95 block of stock, -0- LTG/share, $6.00 basis/share ($8.00 basis - $2.00 liquidating distribution) = $450 for the 75 shares 1/1/96 block of stock,
-0- LTG/share, $13.00 basis/share ($15.00 basis - $2.00 liquidating
distribution) = $1300.00 for the 100 shares.
Let's pretend that on 3/05, John receives a letter from OPL that states there will be no more liquidating distributions and the company has wound down.
John would then,
1/1/86 block of stock, Nothing to do, stock is at -0- basis. 1/1/90 block of stock, Nothing to do, stock is at -0- basis. 1/1/95 block of stock, $6.00 basis/share ($8.00 basis - $2.00 liquidating distribution) = $450 for the 75 shares, $450 LTL on Sch D. 1/1/96 block of stock, $13.00 basis/share ($15.00 basis - $2.00 liquidating distribution) = $1300.00 for the 100 shares, $1300 LTL on Sch D
Thanks, what you have explained makes sense. I have two questions though
1.)We dont know if/when there will be any more liquidation distributions. If there are more and they come after the tax year 2003 what will we do then?
2.)Is the IRS going to say that we should have paid taxes on the $$$$ when we received them and hit us with interest charges next April?
Taxes are due when you receive any "income". If you file quarterly estimated taxes, you should increase your payments accordingly. If you do quarter specific estimates, you need to increase your second quarterly payment to reflect your additional income. If you do not file quarterly estimated payments and the amount you received is significant you can change your withholding exemptions to catch up on your taxes due or make a one time quarterly payment for the second quarter to cover the extra taxes. That payment would be due June 15, 2003.
IRS Publication 550 covers the OPL distribution and the tax questions.
Does anybody know who at the IRS is in charge of the OPL investigation, audits, and overall IRS OPL relations? Sure would be great to get in correspondence with the right people. Maybe they can tell us how it is that we are only permitted to realize a loss when OPL says so?
hitthebigone .... you mean, the lawyers in charge of that class action suit you keep talking about don't know?????
What kind of lawyers are they?
The question is:
How will this be taxed?
The answer is:
To the fullest extent possible under current IRS regulations!
No, I'm not a CPA, but I did stay at a Holiday Inn last month.
Actually, it's questions like this that bring a big smile to my accountant when I walk in.
You are so right.
"Actually, it's questions like this that bring a big smile to my accountant when I walk in."
Thats why I ask the question in this forum. It seems that some of the posters in here are more knowledgeable than the supposed "professionals".
Separate names with a comma.