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Dealing with gains
Q:
I held some shares in a company that was subsequently taken over by another company. Would you please advise on what happens in such circumstances. For instance, when will a capital gain occur? Is it when the takeover has been completed or will it be when I sell the shares issued by the acquiring company?
B Irvine, Edinburgh
A:
Angus Rigby replies:
Generally, when one share is exchanged for another, no capital gain will occur until the new shares are sold. Where cash payments are made for shares, they are treated as a capital gain, as if the shares had been sold.
In some corporate actions, companies are now starting to offer shareholders the choice of different options with different tax implications. For example, a shareholder could be offered the choice of a cash or stock adjustment (or a combination of both) that could be treated either as income or as a capital gain.
Information regarding tax implications should be provided within the documentation explaining your options, and investors who are unsure can always contact the company registrar for clarification.
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Disappearing trust
15 August 2008 [0 comments]Q:
I wish to draw your attention to the ‘Resources Investment Trust’, which is listed in What Investment in the sector entitled ‘Specialist: Liquidity’. In fact, this trust should be in the sector entitled ‘Specialist: Commodities & Natural Resources.
The trust was correctly listed in ‘Specialist: Commodities & Natural Resources’ up to and including August 2007, issue 293, but in the next issue, September 2007, it had been moved to ‘Specialist: Liquidity’.
Also, the performance figures in issue 302 of What Investment, May 2008, for the Resources Investment Trust appear to be somewhat excessive – far outperforming the Merrill Lynch World Mining Trust. Are you certain that these figures are accurate? The reason I query the figures is because I have seen performance figures for these trusts in
other publications where the Resources Investment Trust mostly underperforms the
Merrill Lynch World Mining Trust.
Derek Crawford
Via email
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