Insurance Demutualization Cost Basis

Posted by Andy
The IRS has held that stock received from an insurance company during a demutualization has no cost basis and if you take the cash, the proceeds are 100% capital gain.

A recent court case has told them their position is wrong, but the details about what your basis in the stock is is still cloudy. Some point to the amount (or a percentage of) the premiums you have paid over the years. Others point to the IPO price as a good value of what the stock ownership was valued at. We'll wait and see how this one plays out.

You may have received these kind of proceeds from Met Life or Prudential, two popular insurance companies that went through his many years ago. If you are still holding the stock, then you will want to stay up to date on this issue.

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