(06-11-2016, 12:45 AM)Stavros Wrote: .
- The money you get for the CVRs will be considered as Ordinary Income with a ZERO Basis . . . ie, all profit to you.
I don't necessarily agree with this characterization. An 'event-based' CVR (which the IOC/OSH CVRs will be--as their value will be based on the occurence of an event: certification appraisal) are generally considered 'securitzed' if there is some way to trade them. OSH has stated that they are pursuing listing the CVRs on the ASX. If they are listed, the CVRs will most likely be considered by the IRS as "boot" to the cash/shares received from OSH in the deal (ie. 8.05 X each IOC share--to be received either as OSH shares, cash or ADRs). Thus, the cash received from redemption of the CVRs will share the basis of the original IOC shares (shared basis with the value of the cash/shares of the initial portion of the transaction).
If the CVRs are considered as a "contract" right, rather than 'securitized', they may be considered as ordinary income, but that issue is very unclear as the IRS has not made any direct ruling on this particular issue. A very good argument could be made that the IOC CVRs are still 'boot' to the original transaction, despite not being listed as a security, due to the complex nature of their genesis (ie. sale of a Canadian corporation listed on the NYSE to a PNG corporation listed on the ASX, with certification event for the CVRs including appraisals from a company selected by a French corporation).
Also, the terms of the deal delineate that the CVRs are based on US$ ($6.05 X #Tcfe over 6.2, as certified by the average of the two certifiying appraisers).