Rough outline of my scenario:

Buy stock in Company X 2001.

In 2005, Company X is completely bought out by Company Z.  My shares in X are exchanged for new shares in Z, automagically.

Now, company Z sells some of my shares (at the time of conversion) and gives me cash + leftover shares in Z.


The question:

Is my capital gain considered LONG TERM because I bought Co. X > 1 year ago
or
Is my capital gain considered SHORT TERM because my shares in Z were sold <1 yr after I acquired them (in the merger) ?


TurboTax 2005 seems to think that it is a SHORT TERM GAIN!!  ARRRGHH!  That can't be right.

hmm was it a one for one exchange in shares or by appreciated value?

Generally, a stock split/swap is nothing so that date should not matter.  However, I think Turbo Tax asked you for a date acquired and you listed the swap date.  That'd be my guess.

Quoted: hmm was it a one for one exchange in shares or by appreciated value?

It was by appreciated value.  The Ratio X:Z was 4.something.  I bought at 50; exchange happened around 93.

Originally by SayUncle: However, I think Turbo Tax asked you for a date acquired and you listed the swap date. That'd be my guess.

It asked for the date of the merger, which was 12/01/2005 ; That was also the date of the auto-liquidation of the shares in question during the conversion.  Turbo tax sees that as a holding period of 1 day, therefore short term capital gain.

Quoted: Generally, a stock split/swap is nothing so that date should not matter.  However, I think Turbo Tax asked you for a date acquired and you listed the swap date.  That'd be my guess.

yeah the capitol gains should have been calculated from the original date, unless you paid taxes in the swap year for some reason.

That all depends on what kind of "merger" it was.  If it is a tax-free reorganization, then the holding period would tack and would result in LTCG assuming you held the shares for >1year combined.  If it is a taxable re-org, you'll have to pick up LTCG/L on the X shares at the time of the merger and STCG/L on sale of the Z shares.