Q & A - Taxes on Capital Gain

Date: Sunday 11th 2008f May 2008 04:49:26 PM

Q & A - Taxes on Capital Gain - 11/22/2006

By: Hari Wibowo

Name: Scott D Preble

Website: N/A

Date posted: Tue, Nov 21, 2006 12:21 PM

Question: I hold stock in the Tramell Crow Company (TCC) which is likely to be
bought by CB Richard Ellis (CBG). According to a Trammell Crow press release they will
give investors $49.51 cash for each share held. I paid about $9.00 per share so I
have two questions:

1 Do I pay taxes on the difference per share of $40.51 (49.51-9.00)? And do I have to pay it when I receive the check?

2 Can I reinvest the full amount immediately and not pay or defer taxes?

Thank you,

Scott D. Preble

Answer:

Hi, Scott. Thank you for submitting your question to Novice Investing. For your question number 1), yes, you have to pay taxes on the stock price appreciation ( in this case $ 40.51 per share). If you are using a traditional or discount brokerage to invest in stocks, you most likely will not receive any check. Generally, your broker will credit the account with the money that you were supposed to get from TCC for $ 49.51 a share. You won't be taxed at this point.

2) When you receive the full amount, you can still reinvest the proceed. However, when you file your income taxes annually (presumably March-April period), you have to pay taxes for the profit in this investment.

Your question about taxes is a tough question to ask since rules apply differently depending on your situation. Therefore, please check with your local accountant for clarification.

Hari - Novice Investing

END

Hmm, I am confused. And I have questions

I'm fine, thanks. Bring me back to main page

Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding any securities.

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