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Technology Stocks : Merrill's Internet Basket (HHH)
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To: duncan moyer who wrote (39)2/7/2000 4:15:00 PM
From: Howard Clark  Read Replies (1) of 42
 
I'm not an accountant or tax expert, but I have looked into the tax implications of HOLDRs.

I think that as far as the IRS is concerned, buying a HOLDR is the same as buying shares in each of the underlying stocks. Your per-share basis in each stock is its price at the time you purchased the HOLDR.

In the case of the ELNK/MSPG merger it should be treated just as if you owned shares in each company directly.

What I think this means is (check this out with a real tax person): the stock swap part of the deal is not a taxable event, your basis in the combined company is your combined basis in the two companies minus whatever cash you receive for the fractional share. I think the cash for the fractional share is considered a realized gain, but I'm not sure about that.

If you decide down the road to sell your HOLDR instead of redeeming it for the underlying shares, it probably won't matter what your basis is in each component company. You can compute the gain or loss on the HOLDR as a unit by subtracting the purchase price from the sale price. If you cancel the HOLDR and receive the underlying shares, you must compute your basis individually for each stock.

If you have a subscription to TheStreet.com here is an article on computing your basis on shares in a HOLDR:

thestreet.com
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