Hi All,
I was holding 100 shares of a foreign US Company A. Another Foreign Company B has acquired A with a deal wherein 50% of A shares will be paid out as cash @ $80/share and the rest 50% of A stock becomes Company B stock wherein 4 Company A stocks get converted to 1 Company B stock. The acquisition was completed in November. The Fair Market Value of Company B stock on the merger date is $400/share. The 100 Company A shares acquisition cost is $50/share. Out of the 100 shares, 50 were paid as cash (50*$80) and the other 50 were converted as Company B stock.
Since 4 Company A shares (4*$50 = $200) became 1 Company B stock whose Fair Market Value on the date of merger was $400, there is an unrealized gain of $200*(50/4) overall on the merger date.
- Do we need to pay capital gains tax in India for the unrealized gains of the converted stock portion?
- In the US, the converted shares will retain the acquisition date of original Company A shares for capital gains calculation. In India, can we consider the same acquisition/buying date of Company A shares for the converted Company B stock as well for capital gains (LTCG/STCG) calculation?
- How should we report this conversion activity in Schedule FA Table A3 in ITR? Will it be like the 50% company shares were sold on the merger date at Company B FMV rate of $400 and then we acquired Company B shares with the same buying date of Company A shares?
CAclubindia
