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Where Taxpayers and Advisers Meet

Tax treatment for US company mergers

LankyD
Posts: 3
Joined: Wed Mar 07, 2018 2:49 pm

Tax treatment for US company mergers

Postby LankyD » Thu Sep 13, 2018 4:15 pm

I am a UK resident and until recently owned shares in an american company called General Growth Properties (GGP). Recently this company merged with another company (Brookfield Property (BPY)) and I received cash in my account to reflect this. My understanding is that this was a capital gain and would be taxed accordingly. My brokerage company has just been in touch and asked for me to make a payment to them for 15% of the amount I received in cash. They claim the cash I have received is being treated as a 'special dividend' and is thus subject to withholding tax. I have made the point that this seems ridiculous and that I could have just sold the shares in the open market and had the whole thing treated as a capital gain (which would have resulted in me paying no tax as it is below the annual allowance). My brokerage didn't give me any information about the merger and I had no options to choose the elections beforehand so it seems quite unfair that I am effectively 15% worse off. Is this anything anyone has had any experience with?

AGoodman
Posts: 437
Joined: Fri May 16, 2014 3:47 pm

Re: Tax treatment for US company mergers

Postby AGoodman » Wed Sep 19, 2018 5:17 pm

Companies organise their mergers in all sorts of ways and it seems pretty clear that this was a dividend:

https://www.nasdaq.com/press-release/ggp-inc-sets-record-date-for-preclosing-dividend-in-connection-with-transaction-with-brookfield-20180717-00279

I'm not sure how you were sent 100% of the payment without WT being deducted by somebody but I suspect the brokers are probably correct (you would need a US lawyer to be sure) - they may be on the hook to pay it themselves if they do not recover it from you.

If you pay UK tax on the sum, you may be able to claim credit for foreign tax.


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