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does capital gain tax apply to taxes on tender offer?

Personal Finance & Money Asked on June 16, 2021

Based on my limited understanding of short-term and long-term capital gain taxes in the US, when should I tender my shares?

If I purchase shares of company X on 1/1/2020 and company Y announces an attempt to acquire company X on 6/1/2020. Let’s assume (a) the deal is approved and (b) it will takes 8 months to complete the acquisition.

If I tender my shares on 6/10/2020, I only own the shares for ~6 months and profit from them for <1 year. I assume the profit would be taxed as a short-term capital gain (higher taxes). If I wait until the acquisition is complete, I would own my shares for >1 year, sell them at the same price as the tender offer and make the same profit for >1 year but would be taxed for the long-term capital gain (lower taxes).

Does the saving from the long-term capital gain tax justify the wait ?

One Answer

Whether it's worth waiting for the completion of the acquisition will depend on the size of the potential tax savings. If it's significant, it's worth waiting. If not, it's just dead money which could be better deployed elsewhere.

Answered by Bob Baerker on June 16, 2021

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