Originally Posted by
Aaron
Rights issues (Below is a blurb from an IRD publication)
Companies can offer their shareholders rights to buy new shares, generally at a discount to the market value.
Legislative changes have been made to make it clear that the discounted amount is not a taxable dividend for shareholders that exercise the right, and that the right itself (which has value and may in some cases be traded or renounced) is not a taxable dividend.
The policy rationale for ensuring that rights and discounted shares issued under a rights issue are not treated as dividends is that the company does not give up anything of value. A rights issue involves the company raising new equity when the shareholders invest new funds in the company.
So the discount is not a taxable dividend from the company and the right itself is NOT a taxable dividend therefore if you sell the right, I guess this means the proceeds from the sale of the rights is also not a dividend? (or taxable income) for that matter.
Does anyone have any information on this or have experience with the IRD regarding proceeds from selling rights and whether it is taxable?
Tried a search but nothing came up.