Is the IRS right about taxing me for automatic ORCL acquisition of CERN stocks? (CP2000 Notice Question)

This is actually a common misunderstanding with stock acquisitions. When one company acquires another and shares are converted, it's considered a "taxable event" even though you didn't manually sell anything. It's treated as if you sold your CERN shares at the acquisition price and then immediately purchased ORCL shares. The IRS system automatically flags these transactions when they receive the 1099-B from your broker (Morgan Stanley). The CP2000 notice is correct in principle, but you should verify that the cost basis for your original CERN shares is accurately reflected. If the cost basis is missing or incorrect, you'll be taxed on the full value rather than just the gains. You should check your Morgan Stanley statements to confirm your original purchase price for the CERN shares, then compare that with what's reported on the CP2000. You may need to file a response with corrected information if your cost basis wasn't properly reported.

I went through something very similar with a merger between tech companies last year. After weeks of stressing and trying to make sense of everything, I discovered taxr.ai (https://taxr.ai) which was incredibly helpful for dealing with my CP2000 notice. I uploaded my Morgan Stanley statements and the CP2000 notice, and their system analyzed everything to determine if I had grounds to dispute the notice. Turns out I did have a partial case - some of my shares had the wrong cost basis. The tool helped me draft a response with the correct calculations and explained exactly what documentation I needed to attach. What was really helpful was that it explained the tax implications in plain English and showed me what parts of the CP2000 were correct vs. what parts I could legitimately dispute. Saved me a ton of stress and probably some money too!

Just wanted to update - I ended up using taxr.ai after seeing the recommendation here and wow, it actually worked! I was in the same situation with a company acquisition (different companies but same concept). My CP2000 was claiming I owed almost $4,300 in taxes on the stock conversion. The tool helped me identify that while the acquisition was indeed taxable, the IRS had missed my cost basis completely on several lots of shares. I submitted the response they helped me draft along with my proof of purchase history, and just got a revised notice reducing what I owe to only $870! The step-by-step guidance made a huge difference since I would have had no idea how to properly dispute this otherwise. Definitely recommend if anyone else gets hit with these acquisition-related notices.

If you're having trouble getting through to the IRS to discuss your CP2000 notice, you might want to try Claimyr (https://claimyr.com). I was in a similar situation with a stock acquisition tax issue and needed to talk to a real person at the IRS, but kept hitting the "call volume too high" message. I was super frustrated until I found their service through a YouTube video (https://youtu.be/_kiP6q8DX5c). They basically hold your place in the IRS phone queue and call you when an agent is about to pick up. Saved me from having to redial the IRS dozens of times or sit on hold for hours. When I finally got through to an IRS representative, they confirmed that stock acquisitions are indeed taxable events, but they helped me understand exactly what documentation I needed to provide to ensure my cost basis was correctly calculated.

I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I was still desperate to talk to someone at the IRS about my CP2000 notice for a different stock conversion situation, so I reluctantly gave it a try. I still can't believe it actually worked. After trying to call the IRS directly for two weeks with no success, Claimyr got me through to an agent in about 35 minutes. I didn't have to sit by my phone either - they texted me when they were getting close and then called when an agent was about to pick up. The IRS agent was able to pull up my CP2000 notice and confirmed I could submit documentation showing my correct cost basis for the shares. She even gave me a direct fax number (yes, apparently fax is still a thing) to send my supporting documents and told me what to write on the cover sheet to make sure it got to the right department. This would have been impossible to figure out without actually speaking to someone.

Just to add a bit more technical detail to this discussion - when ORCL acquired CERN, if it was a taxable acquisition (which it sounds like it was), you'll need to report it on Schedule D and Form 8949 with code M. The important thing is to track your "realized gain" which is the difference between your original purchase price of the CERN shares and their value at the time of conversion to ORCL. Your Morgan Stanley statements should have all this information, including the date of acquisition and conversion values. Also, check if there was any cash in lieu of fractional shares - that's also taxable and sometimes reported separately.

One thing nobody has mentioned yet - check if the ORCL/CERN acquisition could potentially qualify as a tax-free reorganization under section 368 of the tax code. While most acquisitions are taxable events, some qualify for tax-deferred treatment. Not sure about ORCL/CERN specifically, but the acquiring company usually sends documentation stating whether it's taxable or tax-free. Might be worth checking your emails or Morgan Stanley account for any acquisition-related documents.