The former shareholder of a pharmaceutical business owes additional tax on a portion of its $191 million settlement payout following a squeeze-out merger, after the Third Circuit determined Thursday that the shareholder couldn’t convert what was ordinary income into capital gains.
Charles D. Berwind Trust for David M. Berwind owned stock in Berwind Pharmaceutical Services Inc. ahead of the 1999 merger, then received a $191 million settlement payment following a legal dispute with BPSI’s majority shareholder in 2002. The settlement was calculated based on an appraisal of the trust’s former interest in BPSI.
The trust appealed when the US Tax ...