Tax Q&A;: Merger Stock

This daily tax season column publishes questions from readers and answers from local members of the California Society of Certified Public Accountants.

Q. In 1998, a company in which I owned stock was merged into another company. I surrendered my shares to the new company and received in return stock in the new company equal to the value of the stock that I surrendered. There was no monetary gain or loss to me. I still retain the stock in the new company. The question is: How do I handle this transaction on my Schedule D of my 1998 1040 tax return?

A. Generally speaking, no gain or loss would be recognized when stock is received solely in exchange for the stock of another corporation if both corporations are parties to the reorganization. There would be nothing to report on Form 1040 Schedule D until the stock actually is sold. For tax purposes, the basis or cost of the old stock would be transferred to the new stock received in the exchange.