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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7197
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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My husband and I owned stock in a local bank which has been

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My husband and I owned stock in a local bank which has been taken over by another bank. The new bank did not offer like shares of stock, but requested we return our Certificates in the prior bank and received a cash payout. What are our capital gains implications under these circumstances?

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Stephen E. Grizey :

You have a long-term capital gain based on the difference between what you paid for the local bank's stock and what you received for it, assuming of course that you held the local bank's stock for 1 year or more...............

JACUSTOMER-ry6utn89- :

Thank you Mr. Grizey. What is the tax rate and is there a minimum or maximum taxable gain?

Stephen G. and other Tax Specialists are ready to help you
Generally 15%, but it could be less depending upon your tax bracket. Are you employed?

Did the transaction occur in 2010?

I'm not sure what you mean by minimum & maximum capital gain.... do you mean the capital gain rate?

Here's a link to some information you might find helpful now & for future planning:

Edited by Stephen E. Grizey on 1/2/2011 at 4:49 PM EST
Customer: replied 6 years ago.
We are retired; however we have rental income and other income making our bracket 25%. How long do we have to re-invest the gain so as to avoid paying capital gains?

That will not avoid the capital gain. There's nothing you can do. In fact, you'll need to review the estimated tax payment requirements in order to avoid penalties. Depending upon when the transfer for cash was made, you may already be behind on this..........
Customer: replied 6 years ago.

We received the funds on Wed. December 23. Our profit on this stock was $11,000 so if I am right my tax would be approximately $1650 based on a 25% bracket. Should I still review the estimated tax payment requirements due to timing of this payment?

Yes. Technically, you owe the tax on 1/15/2011. You'll need to check the NJ state income tax also.

Now there are some exceptions to the underpayment of estimated tax penalty. The one that you would most likely qualify for would be if the tax you paid in in 2010, either through estimated payments or withholding equals or exceeds your 2009 actual tax, then you can delay paying any additional amount you owe for 2010 (above the amount of the 2009 actual tax) until you file your return for 2010 on 4/15/2011 or if you were to file for an automatic filing extension, you would have to pay the additional 2010 tax with the extension.

Do you understand? If not, we'll have to use some specific numbers so I can tell you exactly what must be done.

Edited by Stephen E. Grizey on 1/2/2011 at 5:41 PM EST
Customer: replied 6 years ago.
I will now throw in a wrench - we are residents of VA, but rentals are in NJ. So we never pay NJ income tax because we do not have enough income to pay NJ income tax. The banks are both in NJ so I am assuming it is NJ income. Should I just send NJ an arbitrary sum as an estimated payment?
No. There should be no tax due in NJ for this stock transaction. You will owe any tax on the sale of stock to your state of residence, ie. VA, so you'll have to check those estimates rather than NJ.
Customer: replied 6 years ago.

Well I think I've "got it". I will check VA and forward whatever sum is due. As to the Federal return, we received a refund for 2009 and were not required to pay estimated tax so can I assume I will cover everything on my 2010 return?

No. You would need to check your 2010 withholding against your actual 2009 taxes to make sure. If your refund was substantial and you didn't change anything else you may be OK, but there are a lot of variables, so I'd check it if it were me.
Customer: replied 6 years ago.

Well looks like I should send an estimated tax payment to the IRS before the 15th.

You should just have to send enough to get your total tax paid in for 2010 (through withholding) greater than your total 2009 tax. You may need to complete Form 2210 to qualify for the penalty exceptions for 2010.
Customer: replied 6 years ago.
Thank you. I will proceed to send an estimated payment and look into filing a 2210.
Good. I meant to say that the 2210 would go with your 2010 tax return.
Customer: replied 6 years ago.

I checked the 2210 and found it was for 2009 and thought I would have to wait for 2010 form. I really appreciate your help. Very enlightening, but of course, not what I wanted to heard re tax implcations when this all came about not by my choosing. You were a great help.

Thanks very much.