Stock Sales and Share Lending

On February 2, 2007, the IRS released a Generic Legal Advice, disagreeing with a taxpayer's reporting of a complex plan to sell stock, coupled with a share lending agreement. The taxpayers did not report the transaction, believing it to be a share loan. The IRS saw things differently, arguing t...

Full description

Saved in:
Bibliographic Details
Published in:M & A Tax Report 2007-04, Vol.15 (9), p.5
Main Author: Morris, Richard C
Format: Article
Language:English
Subjects:
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:On February 2, 2007, the IRS released a Generic Legal Advice, disagreeing with a taxpayer's reporting of a complex plan to sell stock, coupled with a share lending agreement. The taxpayers did not report the transaction, believing it to be a share loan. The IRS saw things differently, arguing that the transaction was a sale. In Rev. Rul. 2003-7, the IRS concludes that a shareholder does not sell or dispose of the stock under Section 1001 at the time the agreement is executed. In addition to the shareholder's continuing right to receive dividends, the shareholder had a right, unrestricted by agreement or economic circumstances, to reacquire the shares by delivering cash or other shares. Unlike the transaction described in Rev. Rul. 2003-7, the transaction in AM 2007-004 had two components: a variable prepaid forward contract and a share lending agreement.
ISSN:1085-3693