Jester,

I failed to ask if the tender would be considered a taxable event. Thanks for the info.

Jester,

I wanted to ask you to clarify the tax status of ALU shares that you brought up. I'm on the phone with my broker, and theyre passing the buck by saying have my cpa advisor read the 100 page relevant document.

Is your understanding that 

1. One is going to get hit with a potentially nasty and unwanted capital gains of the ALU shares tendered, as the shares will be considered as sold as of the close of the tender deal (Dec. 22nd); or

2. The holding period doesn't involve an immediate capital gain, but the holding period 'clock' gets set back to 'zero' on the NOK shares you got for your ALU shares?

Thanks in advance.

Jamok,

They've already changed my ALU shares to some CUSIP to prevent trading, and they explained that if I did change my mind and want to sell, it could take days to arrange. ALU itself will likely cease trading around the 22nd. My understanding is at that point it will be as if I sold the ALU at that price, which will mean short term capital gains for me in 2015. What I'm not clear on is when exactly the holding period for the NOK shares they become begins, but it will be some time after the 22nd.

Jester,

Thanks for the reply on capital gains consequences to ALU. If that's so, it truly sucks - I have to take a ST cap gain that was completely unexpected. By accident, it turns out that I had held off tending while I saw if I wanted to acquire more (which I did). So I'm not committed to tendering my shares.

I don't think that really helps a bit - while lt cap said that NOK would likely make a buyout offer that essentially was equivalent to the exchange one is getting if shares are tendered, it's clear as mud to me whether not tendering would end up with avoiding a caps gains hit, as it kind of uncharted territory, and taking 'pot luck' hasn't worked out for me in most situations.

My brokerage went so far as to say that in their past experience, it's essentially not a taxable event - that is, your shares get translated into the acquirer's shares, and the only cap gain involved is the cash for cash in lieu for a fractional share. Of course they wouldn't commit to that, saying ask your tax advisor. They did say that how the event was to be handled would probably be announced by NOK after the fact, which of course helps not at all. But I have seen that sitaution where a company declares a 'special dividend', and then announced how it should be treated tax-wise after the fact.

It *sounds* to me like you feel pretty confident that it's a short-term capital gains event, and one can most count on paying tax on whatever profit one has. If I'm wrong, and I would like to be, correct me. And thanks for all the info. Merry Christmas - I think Santa just took a dump under my tree :-)

Jester,

One more spurious thought about the ALU unwanted, unexpected cap gains issue: It's hard for me to suss why the 'sale' (altho there is no 'sale' in the usual sense of the word) of ALU and the 'acquisition' (although nothing was technically 'bought') of NOK is a taxable event. One might play with the 'equivalent' term as defined in the wash sale rule, which connects shares bought and shares sold in this manner as simply a different way to 'own' a stock position. If one bought ALU at $4.00, and it gets 'sold' in the tender, one has a short term loss. If one bought NOK after that, one might argue I'd think that you've bought an 'equivalent' stake in essentially the same stock, and so wash sale would apply.

I know it doesn't work that way. But it seems to me just another example of the silly putty IRS rules that always end up with tails they win heads you lose - with very rare exceptions - such as your telling a rather stunned board - probably 10 years ago - how short term calls become taxed long term if the underlying stock has been held long term. 

Goddamn IRS - 'oops', I've expressed hostility to a federal agency, and therefore might be a threat to act in a violent manner towards the representatives of that agency - so I need to have all my civil rights taken away, all my communications bugged, getting barred from flying, have my movements tracked, all my finances monitored, the govt having to know what I'm eating for breakfast, and that's just for starters. Land of the free,home of the brave.

Jamok,

I considered the wash sale thing, however there are two problems with that:

1. Is it substantially similar? Not sure it would pass that test.

2. Wash sale is one-sided to the IRS benefit. It's only there to prevent you booking a loss on a trade to reduce your tax hit. It doesn't prevent you being taxed on a profit.

As for it being a taxable event, that's just what the guy told me. I've no idea the ins and outs of such an event, or why it is. I have no reason to assume he's wrong, unless others hear differently from their brokers.

Jester,

Yes, your logical is pretty impeccable - and I think it would replicate how the IRS would see this 'event'. Still, as you imply, the 'real deal' in terms of taxability cannot really be known until after the event - which might send some people scurrying to rebalance tax loss selling - if that info is made available before year's end, which is also clear as mud.  Dance with it - we're not calling the tune.

I am curious about this: in the 'blackout period' in which ALU get 'called away' and replaced with NOK - if one thinks there's an opportunity in buying more on a given day, I take it that one should just buy NOK, yes? If that 'blackout' ends on the 22nd, there's very little 'trading time' as it encompasses a weekend, and it probably isn't an issue - just curious about if that's the deal. That is, really starting tomorrow, buying NOK is the only way to play the stock.

And I am tempted to buy some more INFN, as I can't see any reason for its fall, except that I have a position that is large enough for me already. Ironically (for me), I have a profit in ALU, and paper losses of some significance on INFN and CIEN, neither of which I want to sell for tax losses, given the beta unpredictability. So I'll just deal with it.

I called back Fidelity and they confirmed this is a taxable event.  Ticks me off given that as far as I am concerned my intent is to allow the conversion, i.e. my intent is not to sell them.  Seems pretty arbitrary and unfair that the IRS imposes this rule on tender offers.  The net result is that I have not pocketted any gains, if anything I am simply allowing the conversion to happen and any gains are rolled over.

I was also told that the information was included in that massive document we should all have gotten, page 173.  I cannot find the darn doc, I am looking online to see if I can find it

lt cap,

Schwab didn't even specify what page that might be on. They simply said, after checking with some other dept., that they think it is a taxable event, but either have my 'tax advisor' read that document (lol), or wait for NOK to issue a statement after the fact.

I think that's about the same as them turning over a 'magic 8 ball' and reading to me, "Answer cloudy. Ask again later." Or, if as seems the most likely, "Assume the position."

The Fidelity guy also talked to some other department, when he came back to me he asked if I had read the document, I chuckled and answered that it was so massive that I only browsed it, and then it was not much browsing at all.  He then replied he could understand that and went on to tell me he had been told what page the tax info was on. When he said page 173, laughing I replied: massive indeed! He laughed.

BTW, re adding to your INFN position, if it feels it is overexposing you because you are too concentrated in networking stocks follow your gut.

Of course given the fairly steep decline ALU (and NOK) have had since December 2nd when ALU stock traded as high as $4.08, the gains are shrinking fast.

I do have about 7K shares I bought in the $2.50s, then a whole bunch in the 3.50s and some at higher prices than todays close.  I sense this market will have a rough January.  The valuations are high considering that corporate America is in the midst of a profit recession.

That's awesome, page 173, lol. I never got a doc in the mail, which I'm thankful for. If I got an email announcing it, it's probably in my spam. You'd think an executive summary half page description of what matters to most investors would have been helpful. I mean, is there anything in pages 1-172 that I care about?

All kinds of legal jargon

I have looked for the darn doc at the SEC site, Nokia's and Alcatel's and have come up empty :-(

Still the bottom line is that we are on the hook for short term cap gains, although I believe the 7K shares I bought are over 1 year old.

The question I now have is as follows:

Since I bought shares at higher prices than today's close, those shares be treated as wash sales?  That would really suck!

Yes!  The 7K shares I bought in the 2.50s were purchased on Oct 2014, so tey should be treated as long term cap gains.

BTW, I only found this which states in ambiguous fashion where "the" doc could be found:

alcatel-lucent.com/ne...olders

There’s no point in acting surprised about it. All the planning charts and demolition orders have been on display at your local planning department in Alpha Centauri for 50 of your Earth years, so you’ve had plenty of time to lodge any formal complaint and it’s far too late to start making a fuss about it now.