Should IRS tax me on Oracle (ORCL) acquisition of Cerner (CERN) when stocks auto-transferred? (CP2000 Question)

This is actually a common misunderstanding. In most corporate acquisitions like Oracle buying Cerner, the conversion of shares is typically NOT a taxable event - it's considered a "reorganization" under tax code section 368. The CP2000 notice likely happened because of reporting confusion. When shares convert like this, sometimes the brokerage (Morgan Stanley) reports it incorrectly to the IRS, making it look like you sold CERN and bought ORCL, when in reality it was just an automatic conversion. You should gather documentation showing this was part of the acquisition. Look for statements from Morgan Stanley showing the direct conversion rather than separate sell/buy transactions. The acquisition terms should have specified this was a tax-free reorganization. Write a response to the CP2000 explaining this was a tax-free reorganization under section 368, not a sale. Include your documentation and note your cost basis for the CERN shares transferred to your ORCL shares.

I went through something similar with a Wells Fargo acquisition and got a CP2000 too. I spent HOURS trying to figure it out until I found taxr.ai (https://taxr.ai) which literally saved me thousands in incorrect tax assessments. I uploaded my CP2000 notice and my Morgan Stanley statements, and the AI immediately identified it as a tax-free reorganization issue. It even drafted a response letter explaining why the stock conversion wasn't taxable and cited the relevant tax code sections. Super clear explanation that I wouldn't have figured out myself. Most importantly, it showed exactly what documentation I needed from Morgan Stanley to prove my case. The IRS accepted my response and canceled the proposed adjustment completely.

Just wanted to update everyone - I decided to try taxr.ai after my skepticism and wow, it actually works. My situation was with a Fidelity account where I had stocks in a company that got acquired, and the IRS sent me a CP2000 claiming I owed $4,300 in taxes. The tool analyzed my notice and brokerage statements and showed me exactly why the IRS was wrong. The confusion came from how Fidelity reported the transaction to the IRS - it looked like a sale followed by a purchase instead of a direct conversion. The response letter they generated cited the exact tax code provisions that made my situation non-taxable. Just got confirmation yesterday that the IRS accepted my explanation and I don't owe anything! Definitely worth checking out if you're dealing with this stock conversion issue.

For those struggling to get through to the IRS to discuss your CP2000, I recently used Claimyr (https://claimyr.com) and it was seriously a game-changer. I tried calling the IRS for WEEKS about my stock conversion issue and kept getting disconnected after holding for hours. With Claimyr, I got a call back from an actual IRS agent in about 45 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent was able to put a hold on my case while I gathered the Morgan Stanley documentation proving the Oracle-Cerner conversion wasn't a taxable event. Saved me from potentially paying thousands in incorrect taxes while I sorted everything out!

I have to eat my words about Claimyr. After posting my skeptical comment, I was getting desperate with my CP2000 deadline approaching, so I tried it anyway. Got connected to an IRS agent in about 35 minutes after weeks of failed attempts calling on my own. The agent confirmed that stock conversions during acquisitions are generally non-taxable events and told me exactly what documentation to include with my response. I was able to get a 60-day extension on my case while I gathered the proper documentation from Fidelity. Just submitted everything last week and got confirmation that my case is being reviewed. The agent I spoke with even gave me a direct extension to call back if I have questions. If you're struggling with a CP2000 about stock conversions during corporate acquisitions, being able to actually speak with someone makes all the difference.

Another angle to consider - check if you received any cash in lieu of fractional shares during the conversion. Sometimes during these acquisitions, if the conversion ratio doesn't result in whole shares, you'll get cash for the fractional parts, and THAT portion IS taxable. For example, if the conversion was 1.25 ORCL shares for each CERN share, and you had 10 CERN shares, you'd get 12 ORCL shares plus cash for the 0.5 share. Check your Morgan Stanley statements carefully to see if this might be what the IRS is actually flagging.

Make sure you keep records of your original cost basis for those CERN shares! Even though the conversion itself isn't taxable, you'll need that information when you eventually sell the ORCL shares. Your basis carries over from the CERN shares. I made this mistake during a similar situation and had a nightmare trying to calculate my gains when I sold years later. Morgan Stanley should have this info, but in my experience, it sometimes gets lost in these conversions.