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The information in this document provides general answers to questions US shareholders of IHS Inc. may have about the tax consequences of the merger of IHS Inc. and Markit Ltd. which was completed on July 12, 2016.
As a result of the merger, each issued and outstanding share of IHS Inc. common stock was exchanged into 3.5566 common shares of IHS Markit Ltd. (formerly known as Markit Ltd.) plus cash in lieu of any fractional shares based on then prevailing market prices. For US shareholders of IHS, this exchange of shares is treated as a taxable transaction in 2016 for US federal income tax purposes. For non-US holders of IHS common stock, the tax consequences of this merger will vary by tax jurisdiction.
The information in this document is general in nature and may not apply to your particular tax or financial situation and should not be considered individual tax advice. Consult your professional tax advisor for specific guidance on how the merger has affected or will affect your personal tax situation. For details of the US tax consequences of the merger, you should review the Registration Statement on Form F-4 filed by IHS Markit Ltd. (formerly known as Markit Ltd.) with the SEC available on the IHS Markit Investor Relations website.
The following references and terms used in this document are more fully described at the end of this document: IHS Inc., Markit Ltd., IHS Markit Ltd., merger, IHS shareholders, Markit shareholders, shareholders, and closing date.
Tax Consequences to US Holders of IHS Common Stock
What are the tax consequences of the merger to US holders of IHS common stock?
In general, subject to the discussion below relating to the potential application of Section 304 of the US Internal Revenue Code, a US holder will recognize gain or loss equal to the difference between (i) the fair market value of the IHS Markit common shares received by such US holder in the merger (including cash in lieu of any fractional IHS Markit common shares) and (ii) the aggregate tax basis in the IHS common stock surrendered in the merger.
Such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the US holder's holding period for the IHS common stock surrendered exceeds one year at the effective time of the merger.
I did not sell my IHS stock. Why is my broker reporting on a Form 1099 that my IHS stock was sold/disposed of in the merger?
For US shareholders, the exchange of IHS stock for IHS Markit common shares in the merger was a taxable transaction. The exchange was generally reported as a sale of IHS stock for proceeds in the form of IHS Markit common shares with a value equal to the fair market value of IHS Markit common shares as of the closing date of the merger.
Shareholders (other than those exempt from information reporting in the US) should receive a Form 1099 from their bank or broker in February 2017 reporting the proceeds of the merger.
How were the proceeds on the Form 1099 determined?
- The proceeds of the exchange of IHS stock for IHS Markit common shares in the merger were determined by multiplying the number of IHS shares you held by $116.94. This value was determined by multiplying $32.88, the fair market value of one common share of Markit Ltd. as of the closing date of the merger, by the 3.5566 exchange ratio. The $32.88 fair market value of Markit Ltd. was determined by averaging the high and low trading prices of one Markit Ltd. common share on the NASDAQ on July 12, 2016.
How do I calculate my gain/loss?
- If you were a US shareholder of IHS stock at the time of the merger, you will generally recognize capital gain or loss in 2016 equal to the difference between the value of the IHS Markit common shares you received (valued at $32.88 per IHS Markit common share), including cash in lieu of any fractional IHS Markit common shares) and the cost basis of your IHS stock. The cost basis of your IHS stock generally is the purchase price you paid for the stock plus the costs of the purchase such as commissions or transfer fees. US employees who received Restricted Stock Units under the IHS Inc. Long Term Incentive Plan will have different rules and will include in the adjusted cost basis the fair market value of the shares on the vest date.
What is my basis in my new IHS Markit (INFO) common shares?
- A US holder's aggregate tax basis in the IHS Markit common shares received in exchange for IHS stock will generally be $32.88 per share, which is equal to the fair market value of IHS Markit common shares as of the closing date of the merger.
Where can I find documentation of the share values described in the question above to give to my tax preparer?
- IHS Markit has posted an Internal Revenue Service Form 8937 on our investor relations webpage that provides: The fair market value of one IHS Markit Ltd. common share at the time of the merger: $32.88 The fair market value of 3.5566 IHS Markit Ltd. common shares at the time of merger: $116.94 A description of the tax consequences of the exchange of IHS stock for IHS Markit common shares in the merger Go to www.ihsmarkit.com. Click on the Investor Relations link, then click on Financial Information, and finally click on IRS Form 8937.
Is the gain/loss long-term or short-term?
- Your gain or loss will be long-term capital gain or loss if you held your IHS shares for more than a year prior to the closing date. Gain or loss must be calculated separately for each block of IHS stock if blocks of IHS stock were acquired at different times or for different prices.
When did my holding period in my new IHS Markit common shares begin?
- The holding period for the IHS Markit common shares received in exchange for IHS stock began on July 13, 2016, the day after the closing date.
What is Section 304 of the U.S. Internal Revenue Code and how might it be applicable to me?
- If you were holding shares of both Markit and IHS at the time of the merger, the entire value of the IHS Markit common shares you received in exchange for your IHS stock in the merger could be treated as a dividend rather than a sale or exchange, under Section 304 of the U.S. Internal Revenue Code. This is described more fully in Amendment No. 1 to the Form F-4 Registration Statement filed by Markit Ltd. with the Securities and Exchange Commission on June 6, 2016. Consult your professional tax advisor for guidance.
Am I subject to the Net Investment Income Tax?
- Individuals receiving net investment income, which includes dividends and capital gains, among other items, are subject to a 3.8% Net Investment Income Tax on all or a portion of those income items if their modified adjusted gross income for a calendar year (including the net investment income items) exceeds $200,000 for an unmarried individual, $250,000 for a married taxpayer filing a joint return (or a surviving spouse), or $125,000 for a married individual filing a separate return. View information about the Net Investment Income Tax.
Are the capital gains and losses subject to state tax?
- Generally yes, unless state tax law specifically exempts or excludes such gains and losses. Please contact your tax advisor about the application of these rules to you.
Am I subject to U.S. backup withholding tax?
- Under certain US federal income tax rules, information reporting requirements may apply, including providing your bank or broker with a Social Security number, and an IRS Form W-9 or W-8BEN, as applicable, to establish that you are not subject to backup withholding. Contact your bank or broker for more information.
Why is the merger a taxable transaction for U.S. holders of IHS stock?
- In this transaction, IHS stock was exchanged for IHS Markit Ltd. common shares in a transaction which did not qualify as a tax-free "reorganization" under the U.S. Internal Revenue Code. Even if the transaction had qualified as a tax-free "reorganization," US holders of IHS stock still would have been required to recognize taxable gain on the exchange, because business combinations where the stock in a US company is exchanged for stock in a foreign company generally results in the recognition of taxable gain for US shareholders of the US company under US tax rules, if those shareholders collectively receive more than 50 percent of the stock of the foreign company in the transaction.
Tax Consequences to Non-US Holders of IHS Stock
Are non-US holders of IHS stock liable for US federal income tax on the merger?
In general, a non-US holder of IHS Markit common shares will not be subject to US federal income tax or US federal withholding tax on any gain recognized on the exchange of IHS stock for IHS Markit common shares in the merger, unless:
- The gain is effectively connected with the non-U.S. holder's conduct of a trade or business in the US, and if required by an applicable tax treaty, is attributable to a permanent establishment maintained by the non-US holder in the US; or
- The non-US holder is a nonresident alien individual present in the US for 183 days or more during the taxable year of the sale or disposition, and certain other requirements are met.
Non-US holders of IHS stock should consult with their tax advisor for more information.
I am a non-US taxpayer. Why did my bank/broker withhold US income tax on my IHS stock?
If you were holding shares of both Markit and IHS at the time of the merger, the entire value of the IHS Markit common shares you received in exchange for your IHS stock in the merger could be treated as a dividend rather than a sale or exchange, under Section 304 of the US Internal Revenue Code. Any amount treated as a dividend could be subject to US withholding tax if you are a non-US taxpayer. This is described more fully in Amendment No. 1 to the Form F-4 Registration Statement filed by Markit Ltd. with the Securities and Exchange Commission on June 6, 2016. Consult your professional tax advisor for guidance.
In addition, under certain US tax reporting rules, you may be subject to US backup withholding if you fail to provide complete and accurate required information to your bank or broker, which may include an IRS Form W-9 or Form W-8BEN, as applicable. Contact your bank or broker for more information.
As a non-US holder of IHS stock, can I receive a refund of US backup withholding tax?
Please contact your tax advisor to determine if a refund is available to you. More information is also available from the IRS at www.irs.gov.
I was a non-US shareholder of IHS stock. Is this transaction taxable in my tax jurisdiction?
Different tax jurisdictions may have different tax treatments. Contact your tax advisor about your specific tax obligations.
Publication of Issue Price of New 2022 Notes Pursuant to Treas. Reg. Section 1.1273-2(f)(9)
IHS Markit is publishing this notice pursuant to U.S. Treasury regulation §1.1273-2(f) (the "Regulation") with respect to the exchange offer (the "Exchange Offer"), which was settled on July 28, 2016, and in which holders received 5% New IHS Markit Notes due 2022 ("New Notes") in exchange for their existing 5% Senior Notes due 2022. The Regulation requires the issuer of a debt instrument to determine whether the debt instrument is "traded on an established market (publicly traded)" within the meaning of the Regulation and, if so, the fair market value of the debt instrument.
IHS Markit has determined that the New Notes are "traded on an established market (publicly traded)" within the meaning of the Regulation and the issue price of the New Notes is 103.907% (expressed as a percentage of face amount).
As provided by the Regulation, this determination is binding upon all holders of the New Notes unless the holder explicitly discloses, in accordance with the requirements of the Regulation, that its determination is different from the IHS Markit determination on the holder's timely filed US federal income tax return for the taxable year that includes its acquisition date of the New Notes.
This notice is only intended to fulfill the IHS Markit notification obligation under the Regulation and does not constitute tax advice. IHS Markit urges each holder of the New Notes to obtain professional tax advice to determine the implications of this notification on the determination of the holder's income tax liabilities.
For further information, please contact:
IHS Markit Investor Relations
+1 303 790-0600