What are the tax consequences of a demutualization?
While the state cannot provide tax advice, which should be obtained from a qualified professional, demutualized insurance companies have uniformly stated that the receipt of cash from a demutualization (as well as the eventual sale of stock received in a demutualization) constitutes a taxable event. The Internal Revenue Service has held that the taxable basis for demutualization compensation is zero. Thus, the receipt of cash may be taxable, and if you sell any stock received, the cash proceeds may be taxable.
