How do I compute the cost basis in NFS stock for tax purposes?
If you purchased your stock in the open market or through dividend reinvestment, the cost basis is generally what you paid for the shares. If you received shares of NFS stock in connection with the Provident Mutual demutualization, the cost basis for tax purposes is unclear. The IRS has historically taken the position that the cost basis of stock distributed to policy holders as part of a demutualization is zero. However, a recent Court of Federal Claims ruling (Fisher v. United States) disagreed with the IRS and held that the taxpayer does have a basis in stock received as part of a demutualization. The IRS has appealed the Court of Federal Claims ruling and so at this time it is unknown how this issue will ultimately be decided by the courts. As calculation of the tax basis can be different for each shareholder based upon individual circumstances, we strongly urge you to consult a tax adviser.
