Tax Reminder for Arbitrage Investors: Deduct Reorganization Fees
I just realized as I was preparing my income taxes that I was about to forget the $25 voluntary reorganization fees that I’m charged when tendering shares. I rack up quite of few of these fees throughout the year when I take advantage of odd lot tender offers. Forgetting to adjust for these fees would have cost me some unnecessary money on my tax bill.
Be sure that you don’t forget to consider those fees when preparing your taxes. Those tender offer fees did not show up in my buy or sell confirmation sheets and they may not show up on yours either. The 1099 tax forms from my broker also didn’t include these fees, but my broker’s tax reporting is rather skimpy. Those fees do show up in my transaction history and monthly statements.
I believe the proper way to handle these transaction specific fees when filing U.S. income taxes is to adjust the cost basis of the stocks. I’m not a tax expert, so please check with a tax professional. You can also consult IRS Publication 550. The publication does not make specific reference to voluntary reorganization fees, but it does generally discuss how to handle transaction based fees.
I hope you didn’t forget to adjust your tax returns for tender offer fees. If you did forget and already filed your taxes, you could always consider filing an amended return.