This is a remarkably simple transaction. You have a tax-free merger where you receive one share of BHGE for each share of BHI tendered, and you have a dividend. You won't have a realized loss until you actually sell your shares.:
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U.S. Federal Income Tax Consequences to U.S. Holders
This
section applies to you if you are a U.S. Holder. You are a U.S. Holder
if for U.S. federal income tax purposes you are a beneficial owner
of Baker Hughes common stock that is:
•
a citizen or individual resident of the United States;
•
a corporation, or other entity taxable as a
corporation, created or organized in or under the laws of the United
States, any state therein or the District of Columbia; or
•
an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
You
will not recognize gain or loss as a result of the Mergers and the
Conversion. Your aggregate tax basis in the shares of Class A
Common Stock received will be the same as your tax basis in the shares
of Baker Hughes common stock exchanged. The holding period of the shares
of Class A Common Stock you receive will include the holding period of
the shares of Baker Hughes
common stock exchanged.
The
Special Dividend will be characterized as a dividend for U.S. federal
income tax purposes to the extent paid
out of New Baker Hughes’ current or accumulated earnings and profits, as
determined for U.S. federal income tax purposes. Baker Hughes does not
expect that the Special Dividend will exceed New Baker Hughes’ current
and accumulated earnings
and profits. To the extent that the Special Dividend exceeds New Baker
Hughes’ current and accumulated earnings and profits, the excess will
first reduce your basis in the Class A Common Stock you received, but
not below zero, and then
will be treated as gain from the sale of the Class A Common Stock.
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Tom Young
