Originally Posted by Kier
. My question is how do I report the $6525? Is it taxed as income or capital gains?
As capital gain. your basis in the new stock is the same as your basis in the old oneWhen you receive cash in the deal, you NEED to report that amount to the IRS as a capital gain; The acquiring biz can pay cash outright for all the equity shares of your company, paying you a specified amount for each share. Or, it can provide its own shares to you according to a specified conversion ratio ; so, when a M&A is conducted, there are various ways the acquiring company can pay for the assets it will receive; aslongas you trade old biz shares for new through a M&A, the IRS does not look on the event as a taxable transaction. It doesn't matter whether the shares are preferred, common or private; nor does it matter whether the trade was voluntary on your part or if you voted for it. So,no capital gain or loss has to be reported.