Tax Implications

[oliver.gump]

Just when we think it couldnt actually get worse....

It transpires that the IOC->XOM converion is a taxable event.

It is being treated as if we sold out IOC for cash, and then walked down the street and purchased XOM.

We will be taxed on the increase from our basis on IOC, at the $48.23 sell price.

The XOM share transaction is treated as a separate event.

This advice on taxation is from Deloitte.

However, since Hession and his band of thieves used the laws in Singapore that allow a tax free (payroll and capital gains) process if an employee purchases shares in the company that employs them, they didnt pay any tax at all for all of the value they channeled through the RSU/Share/Option process.

Think of this: Hession may have gotten $100 Million over the last two years, completely tax free. and the process he used to do that meant that he would have to screw the shareholders, so he did.

I suspect that many shareholders will be forced to sell the XOM, just to cover the tax liability.

[bdahl385]

Just when we think it couldnt actually get worse....

It transpires that the IOC->XOM converion is a taxable event.

It is being treated as if we sold out IOC for cash, and then walked down the street and purchased XOM.

We will be taxed on the increase from our basis on IOC, at the $48.23 sell price.

The XOM share transaction is treated as a separate event.

This advice on taxation is from Deloitte.

However, since Hession and his band of thieves used the laws in Singapore that allow a tax free (payroll and capital gains) process if an employee purchases shares in the company that employs them, they didnt pay any tax at all for all of the value they channeled through the RSU/Share/Option process.

Think of this: Hession may have gotten $100 Million over the last two years, completely tax free. and the process he used to do that meant that he would have to screw the shareholders, so he did.

I suspect that many shareholders will be forced to sell the XOM, just to cover the tax liability.

Oliver - I hope you are wrong on this, it never occured to me that this buyout would be a taxable event.  In my 45+ years of investing, I think this would be the first time my acquired company is treated this way.  All other buyouts/mergers were such that the new stock was adjusted using your original basis (original purchase cost and date of buy).

This will be a double whammy for my situation as my largest lot gain is in a non-retirement account.  I have about 12 different purchases of IOC in 5 or 6 separate accounts between myself and my wife.  Most of the holdings are inside IRA's.  I am underwater on most of the IRA lots.  So now I will have to pay taxes on my non-IRA purchases since my first purchases were under 20 seven years ago.   The losses inside the IRA's will not be able to be "written off".

Thank you Dr. Friggin' Pink Shirt.  I did not dissent with my shares but simply voted NO to the offer.  I hope this class action lawsuit JFT is talking about comes to fruition. I have never received much out of any of the dozen or so class action lawsuits my stock holdings have seen over the years. Maybe this time will be different, but I am skeptical.

[oliver.gump]

Just when we think it couldnt actually get worse....

It transpires that the IOC->XOM converion is a taxable event.

It is being treated as if we sold out IOC for cash, and then walked down the street and purchased XOM.

We will be taxed on the increase from our basis on IOC, at the $48.23 sell price.

The XOM share transaction is treated as a separate event.

This advice on taxation is from Deloitte.

However, since Hession and his band of thieves used the laws in Singapore that allow a tax free (payroll and capital gains) process if an employee purchases shares in the company that employs them, they didnt pay any tax at all for all of the value they channeled through the RSU/Share/Option process.

Think of this: Hession may have gotten $100 Million over the last two years, completely tax free. and the process he used to do that meant that he would have to screw the shareholders, so he did.

I suspect that many shareholders will be forced to sell the XOM, just to cover the tax liability.

Oliver - I hope you are wrong on this, it never occured to me that this buyout would be a taxable event.  In my 45+ years of investing, I think this would be the first time my acquired company is treated this way.  All other buyouts/mergers were such that the new stock was adjusted using your original basis (original purchase cost and date of buy).

This will be a double whammy for my situation as my largest lot gain is in a non-retirement account.  I have about 12 different purchases of IOC in 5 or 6 separate accounts between myself and my wife.  Most of the holdings are inside IRA's.  I am underwater on most of the IRA lots.  So now I will have to pay taxes on my non-IRA purchases since my first purchases were under 20 seven years ago.   The losses inside the IRA's will not be able to be "written off".

Thank you Dr. Friggin' Pink Shirt.  I did not dissent with my shares but simply voted NO to the offer.  I hope this class action lawsuit JFT is talking about comes to fruition. I have never received much out of any of the dozen or so class action lawsuits my stock holdings have seen over the years. Maybe this time will be different, but I am skeptical.

With the Deloitte opinion in mind, re-read pages 93-96 of the MIC.

It becomes clear. 

XOM determined how the transaction would take place and that it was simpler for them for the transaction to be a simple process of a buy of IOC shares and then a sell of XOM shares. XOM knew that this would have tax implications for most IOC shareholders, but that didnt matter to them at all.

Hession and his team, also knew that the transaction if handled in this manner would have tax implications, so they moved their pay into the RSU process and bypassed the capital gains issue (for themselves) and then approved the transaction, because they wanted to be able to bank the checks they had already written to themselves.

The only impediment was the taxation burden that would be borne by the shareholders, and in the scheme of things, that was a price Hession was willing to pay.

The language of the MIC makes it clear, our capital gain (if any) was to be the cost of Hessions cash, and he saw us as no more than a speed-bump.

[Palm]

This was hashed as a possibility long ago here based on the first offer MIC. One of several reasons I sold out 99% before deal closed. Avoid this debacle and still can participate in class-action with proven damages.

http://shareholdersunite.com/mybb/showthread.php?tid=11164&highlight=Taxes

[Northoil]

This was hashed as a possibility long ago here based on the first offer MIC. One of several reasons I sold out 99% before deal closed. Avoid this debacle and still can participate in class-action with proven damages. http://shareholdersunite.com/mybb/showthread.php?tid=11164&highlight=Taxes

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Palm is right.  The tax treatment was clearly, clearly, CLEARLY spelled out in the MIC.  Plus, it was discussed on this board.  Not that there was anything you could do about it - the only alternatives were to take the deal or dissent/lawsuit.  If the totally distastful and problematic latter choice, the tax treatment would be the same, since you just get cash, just maybe a year or two later.

There's an old adage:  If you don't know what you're doing, stop doing it.  Kaliboo - words to live by.

[Palm]

Thanks Northoil, but there was something that could be done to assure your tax status; sell all or most of your holdings depending on your acquisition date(s) and basis. Pretty standard investment strategy.

[Northoil]

Thanks Northoil, but there was something that could be done to assure your tax status; sell all or most of your holdings depending on your acquisition date(s) and basis. Pretty standard investment strategy.

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Palm - I'm missing the strategy.  I'm not a tax lawyer, but I think a sale is a sale.  You can't keep IOC shares.  You must sell them, either by yourself or through the Exxon transaction, which is forcing a virtual sale.  Either way you sell, the basis of individual lots remain short- or long-term and the tax treatment is the same.   The only possibility for manipulation is to sell a short-term holding early to prevent it from going long-term, although I can't imagine why anyone would want to do that.

[Palm]

Something happened to that post. Had mention in the middle about knowing tax status last fall gave opportunity to look at loss and gain situations and time them for tax advantages, etc etc. Not sure what happened there. Point is tax status of transaction was known plenty early on to properly plan to look how you would be affected and make sense of whether holding shares through deal was a good idea/worth the gamble. And the class-action status isn't affected.

[Kaliboo]

This was hashed as a possibility long ago here based on the first offer MIC. One of several reasons I sold out 99% before deal closed. Avoid this debacle and still can participate in class-action with proven damages. http://shareholdersunite.com/mybb/showthread.php?tid=11164&highlight=Taxes

____________________________________________________________________

Palm is right.  The tax treatment was clearly, clearly, CLEARLY spelled out in the MIC.  Plus, it was discussed on this board.  Not that there was anything you could do about it - the only alternatives were to take the deal or dissent/lawsuit.  If the totally distastful and problematic latter choice, the tax treatment would be the same, since you just get cash, just maybe a year or two later.

There's an old adage:  If you don't know what you're doing, stop doing it.  Kaliboo - words to live by.

Yeah true words if you know you don't know what you are doing.  I sold out years ago and got back in with only half the shares at a much lower price near the last closing price.  So I'm safe.  Everyone  who ever bought this stock thought they knew what they were doing.  Selling out is an admission to that fact.  The story is over only for those who sold out.  You got what you got be it gain or loss.  Good luck.