We have our TSLA shares at a regular brokerage firm. Bought them a long time ago and have happily watched it go up about 1800%.
If/when this delisting/privatising happens, does this mean
- the existing shares need to be sold and are we forced to take the profit and thus tax hit?
- Will this simply be some kind of transfer from public shares to private ones and the IRS won't hear / care about this?
We will have to sell part of the stock to pay for the tax hit if #1. Not really complaining about the profit but would have liked to have picked this time myself.
1. NO!!! This is not a taxable event. You are simply exchanging one class of shares for another.
You only possibly owe taxes if you sell something. You're not selling, you're exchanging. No different than buying a convertible bond and converting into common stock. You can have a huge paper gain (stock is worth more that your cost of the original bond) but
until you sell the new shares you owe NOTHING. Character will be based on the original bond purchase date.
2. Correct the IRS is completely out of the picture. They only care about your cost basis (you responsibility to keep track of) and the character, how long you've held the stock.
If Tesla doesn't exchange for existing shareholders and you choose to not sell in their tender offering.... well there's the challenge. Tesla will no longer pay to have their shares traded on any exchange e.g. NYSE, American. I should point out that
they can't force you to sell your shares. At least not directly e.g. demand you give them up/turn them in. BUT then resale market will be quite difficult. Kind of like selling your house without using REMAX or some real estate broker. Can be done but without Craigs List or E-bay how would you sell said house? A simple sign in your driveway could work but I doubt anyone would seriously rely on that. If Elon is right and we do get to keep them the go to method will be determined by Tesla on their stated open buy/sell timeline. I read it was annually but could be semiannually.
If you own a bond that has matured or been called they can't go to your house and demand you turn it in. They simply stop paying the interest payments. If you don't return the bond to the company they simply keep your $. If you come back later they (if they are still around) will give you back your $1000. If you wait too long and the company has changed hands, went bankrupt, merged...well there securities lawyers that specialize in trying to get your $ back. Getting full restitution can be a challenge. This one I do know from personal experience. We don't even talk about Grandpa's Kansas City Southern stock. Or what used to be Grandpa's stock.
Honestly this is probably already worked out. We would not be their first private investors.