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Ivax Merger

VIEWS: 79 PAGES: 5

									       FREQUENTLY ASKED QUESTIONS
                                   ON THE

      U.S. FEDERAL TAX CONSEQUENCES
                                    OF THE

                    TEVA/IVAX MERGER
                                       TO

         FORMER IVAX SHAREHOLDERS

1. Will I be taxed on the cash and/or Teva ADRs that I receive as a
   result of the merger?

           The acquisition of IVAX by Teva should be treated as a “reorganization"
           for U.S. federal income tax purposes. In general, if you elected to receive
           Teva ADRs in the merger, the receipt of Teva ADRs will be tax-free, but all
           or a portion of the cash you receive will be taxable to the extent you must
           recognize gain on the transaction (as described in Question 2 below).

           If you elected to receive cash in the merger, or if you did not make any
           election, you will receive only cash in exchange for your IVAX shares. In
           that case, you will recognize gain or loss on the difference between the
           cash you received and the tax basis in your IVAX shares.

           You should consult your own tax advisor to determine the U.S. federal
           income tax consequences of the merger to you in light of your own
           personal circumstances, as well as any other consequences under other
           U.S., state, local, and foreign tax laws, which are not addressed in this
           general summary.
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2. If I elected to receive Teva ADRs, how do I calculate how much gain
   I will recognize as a result of the merger?

            The gain, if any, is determined by first calculating your gain realized. This
            number is the result of the fair market value of Teva ADRs and cash you
            receive in the exchange, minus the tax basis in your IVAX shares. The
            gain recognized is determined by comparing which amount is less -- the
            cash or the gain realized (see Examples 1 and 2 below).

            For this purpose, the amount of gain you recognize must be calculated
            separately for each identifiable block of IVAX shares you held, and a loss
            realized on one block may not be used to offset gain on another block of
            shares.

            Your gain will generally be a capital gain, and will be long-term or short-
            term depending upon your holding period in your IVAX shares. The
            examples on the following pages illustrate the calculation of gain in the
            merger for a holder who made an election to receive ADRs. However,
            your facts may be different and you should consult your own tax advisor to
            determine the U.S. federal income tax consequences of the merger to you
            in light of your own personal circumstances, as well as any other
            consequences under other U.S., state, local, and foreign tax laws.

3. What is the fair market value of the Teva ADRs received?

            The fair market value of the Teva ADRs received is the average of the
            high and low sale prices of Teva ADRs on NASDAQ on the effective date
            of the merger (January 26, 2006). The high was $42.49. The low was
            $40.64. Thus, the average of the high and low sale prices is $41.565.

4. What will my tax basis be for any Teva ADRs that I receive as a
   result of the merger?

            The aggregate tax basis of the Teva ADRs you receive will equal the
            aggregate tax basis of the IVAX shares you surrendered, increased by the
            amount of any gain you recognized and decreased by the amount of any
            cash you received. To determine the per ADR tax basis of the Teva ADRs
            you receive, divide the aggregate tax basis by the total number of Teva
            ADRs you received (including any fractional ADR which you will be
            deemed to receive).

5. How do I calculate my gain with respect to fractional ADRs that
   were cashed out?

            You will be considered to have received your fractional Teva ADR and to
            have sold it for cash. You will recognize gain or loss with respect to the

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3151429.2



            fractional ADR equal to the difference between the amount you receive for
            it and your tax basis. Your basis in the fractional ADR will be determined
            as set forth in Question 4 above. That gain or loss will be long-term or
            short-term based upon your holding period in the IVAX shares.




                                         -3-
3151429.2



Examples

Example 1

Assume a holder of 100 IVAX shares with a tax basis of $2,000.

If the holder made a valid election to receive all of his merger consideration in stock, as
a result of pro-ration in accordance with the merger agreement, the holder receives
0.4397 Teva ADRs plus $12.50 cash for each IVAX share he held.

In this example, the holder receives:

■ 43.97 Teva ADRs (0.4397 per share x 100 ADRs)

■ $1,250 in cash (100 shares x $12.50 per ADR)

The fair market value of each Teva ADR received is $41.565. This is the average of the
high and low sale prices of Teva ADRs on the date of the closing of the merger
(January 26, 2006). In this example, the fair market value of the Teva ADRs is
$1,827.61 (43.97 ADRs x $41.565 per ADR).



GAIN REALIZED:               Fair Market Value of ADRs         Cash               IVAX Basis         Gain Realized

                                   $1,827.61          +       $1,250          -      $2,000          =   $1,077.61



GAIN RECOGNIZED:                     Cash Received             Gain Realized                  Gain Recognized
(use whichever amount is
smaller, cash received or gain
realized)                                $1,250                  $1,077.61                       $1,077.61




AGGREGATE BASIS:                 IVAX Basis    Gain Recognized         Cash Received           Aggregate Basis

                                   $2,000         +       $1,077.61       -         $1,250       =       $1,827.61



PER ADR BASIS:                    Aggregate Basis/Number of ADRs                       Per ADR Basis

                                         $1,827.61/43.97              =                      $41.565



The holder’s tax basis in his 0.97 fractional ADR is $40.318 ($41.565 x 0.97).




                                                      -4-
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Examples

Example 2

Assume a holder of 100 IVAX shares with a tax basis of $1,000.

If the holder made a valid election to receive all of his merger consideration in stock, as
a result of pro-ration in accordance with the merger agreement, the holder receives
0.4397 Teva ADRs plus $12.50 cash for each IVAX share he held.

In this example, the holder receives:

■ 43.97 Teva ADRs (0.4397 per share x 100 ADRs)

■ $1,250 in cash (100 shares x $12.50 per ADR)

The fair market value of each Teva ADR received is $41.565. This is the average of the
high and low sale prices of Teva ADRs on the date of the closing of the merger
(January 26, 2006). In this example, the fair market value of the Teva ADRs is
$1,827.61 (43.97 ADRs x $41.565 per ADR).



GAIN REALIZED:             Fair Market Value of ADRs          Cash             IVAX Basis          Gain Realized

                                   $1,827.61            +       $1,250         -    $1,000         =   $2,077.61



GAIN RECOGNIZED:                    Cash Received                Gain Realized               Gain Recognized
(use whichever amount is
smaller, cash received or gain
realized)                               $1,250                       $2,077.61                     $1,250




AGGREGATE BASIS:                 IVAX Basis      Gain Recognized         Cash Received       Aggregate Basis

                                   $1,000           +         $1,250       -       $1,250      =        $1,000



PER ADR BASIS:                   Aggregate Basis/Number of ADRs                       Per ADR Basis

                                            $1,000/43.97               =                    $22.74



The holder’s tax basis in his 0.97 fractional ADR is $22.06 ($22.94 x 0.97).




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