Protective Refund Claim - Demutualization Shares

If in 2004 you sold stock of an insurer that "demutualized" ....Time is running out to file a protective refund claim with the IRS.

A Court has refuted IRS' view that the rights policyholders gave up in the conversion have no value.

So if you followed the Service's advice to use the zero basis for the stock sold, you may end up being due a refund.

But the Court won't determine the value before the statute of limitations for amending 2004 returns lapses on April 15, 2008 for those who timely filed.

To preserve your right to get a refund, fill out Form 1040-X and write "Protective Claim" at the top. IRS should hold it in abeyance.

On your amended return, you'll show reduced AGI and tax due - reflecting the basis you claim in the insurance stock - and effectively ask for a refund for the tax you overpaid.

In part 2 of the form "Explanation of Changes" note that this is a "protective claim - do not process" to protect your right to a refund in the event of a favorable ruling in the "Fisher" case (Eugene A. Fisher, Trustee v U.S. Case No. 04-1726 T) regarding a taxpayer's basis in stock received from xxxxx in a demutualization.
Link: http://tinyurl.com/ywcjkj

Editor's Note: On 2-26-08 I called C.D. Ulrich CPA (the opposition leader of zero basis stock) and he indicated there was no new news of the Fisher Case.