Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Stock Tender Offers

Posted by taxguru on January 14, 2006


Subject: Tender Offer for Cash
Recently BASF announced a tender offer of $37/share in cash for Engelhard.
For a long time shareholder of the latter, this takeover can be a capital gains tax nightmare. Is there a provision in the tax law which would allow for an even exchange with no tax consequences if the proceeds were invested in BASF?

Thank you.


There would be a tax free swap if BASF were to give you shares of BASF stock in exchange for your Engelhard stock.  However, if you actually receive cash, that will be a taxable event; even if you turn around and buy the BASF shares on your own.

Kerry Kerstetter


Thanks for the info; another income tax disaster when long time holders are bought out for cash; reminds me of the 1994 cash buyout of American Cyanamid by American Home Products  – another capital gains windfall for the IRS. Although I regard it as an involutary conversion the IRS would say otherwise.
As a side note, BASF bought the American Cyanamid division from American Home Products in 2000 for $3.8 billion in cash.

Sorry, the comment form is closed at this time.

%d bloggers like this: