In an all-cash acquisition, shareholders typically incur capital gains tax on the appreciation of the company's assets or stock since their initial investment. In an all-stock acquisition, the exchange could qualify as a tax-free or tax-deferred event, provided certain requirements are met.
Long-term capital gains tax rates for the 2025 tax year
For the 2025 tax year, individual filers won't pay any capital gains tax if their total taxable income is $48,350 or less. The rate jumps to 15 percent on capital gains, if their income is $48,351 to $533,400. Above that income level the rate climbs to 20 percent.
If you own a stock where the company has declared bankruptcy and the stock has become worthless, you can generally deduct the full amount of your loss on that stock — up to annual IRS limits with the ability to carry excess losses forward to future years.
You must report all 1099-B transactions on Schedule D (Form 1040), Capital Gains and Losses and you may need to use Form 8949, Sales and Other Dispositions of Capital Assets. This is true even if there's no net capital gain subject to tax.
You can, however, put the lump sum money into a taxable investment account that you set up on your own through a brokerage firm. This will give your money the opportunity to continue to grow. As far as taxes go, you will have to pay taxes on the lump sum. The IRS views this money as income and is taxed as such.
However, if you had significant capital losses during a tax year, the most you could deduct from your ordinary income is just $3,000. Any additional losses would roll over to subsequent tax years. The issue is that $3,000 loss limit was established back in 1978 and hasn't been updated since.
Cashing out stocks essentially means selling them, and most investors should be able to sell their stocks without too much trouble. Buying stocks can be fairly straightforward, whether online or through a financial advisor.
Current tax law does not allow you to take a capital gains tax break based on your age. In the past, the IRS granted people over the age of 55 a tax exemption for home sales, though this exclusion was eliminated in 1997 in favor of the expanded exemption for all homeowners.
Recall that withdrawals from tax-deferred accounts are subject to ordinary income taxes, which can be taxed at federal rates of up to 37%. And if you tap these accounts prior to age 59½, the withdrawal may be subject to a 10% federal tax penalty (barring certain exceptions).
You and other investors who want to avoid paying tax on stocks that have appreciated, will “sell” (in actuality contribute) and reinvest, through a swap. This process involves swapping your appreciated shares for a diversified portfolio of stocks of equivalent value, effectively deferring capital gains tax.
Generally, any profit you make on the sale of an asset is taxable at either 0%, 15% or 20% if you held the shares for more than a year, or at your ordinary tax rate if you held the shares for a year or less. Any dividends you receive from a stock are also usually taxable.
Basic rate taxpayers will be charged at a rate of 18% on gains from shares, while higher and additional rate taxpayers will need to pay 24%. The tax is only charged on your gains, not the total sale price of the shares.
When you sell an investment for a profit, the amount earned is likely to be taxable. The amount that you pay in taxes is based on the capital gains tax rate. Typically, you'll either pay short-term or long-term capital gains tax rates depending on your holding period for the investment.
The Internal Revenue Service (IRS) classifies pension distributions as ordinary income. This means they're taxed at the highest income tax rates. The agency says that mandatory income tax withholding of 20% applies to the majority of lump sum distributions from employer retirement plans.
Capital gains tax rates
Net capital gains are taxed at different rates depending on overall taxable income, although some or all net capital gain may be taxed at 0%. For taxable years beginning in 2024, the tax rate on most net capital gain is no higher than 15% for most individuals.
The current capital gains tax rates are generally 0%, 15% and 20%, depending on your income. Even a 20% tax “may be a small price to pay for success,” says Joe Curtin, head of CIO Portfolio Management, Chief Investment Office, Merrill and Bank of America Private Bank. “You can celebrate keeping the 80%.”
To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Treat worthless securities as though they were capital assets sold or exchanged on the last day of the tax year.
If you fail to report the gain, the IRS will become immediately suspicious. While the IRS may simply identify and correct a small loss and ding you for the difference, a larger missing capital gain could set off the alarms.