Taxability of cash distr. resulting from foreign corp buyout

Technical topics regarding tax preparation.
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I have a client who is an individual US shareholder holding the stock certificate of a French company, say company A. This company was bought out by second European company, say company B, and the result to the shareholders is that he received shares in company B plus a cash distribution in exchange for his shares in company A. The numbers are approximately as follows:
The basis in the shares in company A were $200K, but worth $500K at time of the buyout. The shareholder received shares in company B worth $400K plus $100K in cash. My question is what the taxability is and based on what principle. My first reaction is to allocate the cost of the company A shares to the company B shares and cash based on the fair market value of what he received. Thus, 4/5 of the cost of the company A shares, or $160K, gets allocated to the company B shares and that part of the transaction is not recognized for tax. The other 1/5 of the cost allocates to the cash distribution, thus $40K goes against the $100K received for a $60K gain. The other way to look at it, and the way I am now gravitating more towards, is that the company B shares get the full carryover basis ($200K) and the $100K in cash received is fully taxed as a dividend (qualified if company B is a country with a tax treaty with the US allowing qualifying dividend treatment).
 

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