Some policyholders received stock from their insurance company when the company converted from a mutual form of ownership to a stock insurance corporation. In the past, the IRS has said that such shares had a cost basis of zero. A Federal court has recently decided that the IRS was wrong. However, the IRS has not yet conceded defeat on the issue.
This case was pursued by a Minnesota accountant, Charles Ulrich, CPA, in the spirit of public service. He just thought the IRS position was unjust to taxpayers.
For instance, if the decision stands, for MetLife stock received in the demutualization process back in the year 2000, the probable basis per share will be the lesser of $14.25 (the initial IPO price) or the cumulative net premiums (after dividends) that the policyholder paid divided by the number of shares received. Watch this space for further developments. Detailed information can be found at the following website:
The IPO (initial public offering) prices, which will most likely be your cost basis per share, for various demutualized companies were as follows: AmerUs Life (received Amerus Group Co shares, bought by Aviva).....................$26.00 Anthem Insurance Companies........................................................................$36.00 John Hancock (later acquired by Manulife).....................................................$17.00 MetLife......................................................................................................$14.25 Phoenix Home Life Mutual Insurance............................................................ $17.50 Prudential..................................................................................................$27.50 Indianapolis Life (received Amerus Group Co shares, bought by Aviva)..............$35.63 State Mutual Life Assurance Co (received Allmerica Financial Corp shares)...... $21.00
Your holding period (date of purchase) for the shares would be the date you originally started paying insurance premiums to the company.
A resource which explains how to file a protective refund claim for refund of capital gain taxes (if you already sold the shares and declared a tax basis of zero) can be found at: www.kiplinger.com/letterlinks/demutualization
If you need assistance filing a refund claim, the following resource may be helpful: www.demutualization.biz
