AFL

What are the tax implications for shareholders who sell into the repurchase program versus those who hold the stock?

Created August 12, 2025 at 08:54 PM

Tax side‑by‑side

Action	Typical tax treatment (U.S.)
Sell into the buy‑back (i.e., tender shares at the offered price)	The transaction is a realized capital gain or loss. The gain is taxed at the short‑ or long‑term rate depending on how long you have held the stock (≤ 12 months = short‑term ordinary income; > 12 months = long‑term capital‑gain rates, 0 %/15 %/20 % based on your taxable income). The basis is your original purchase price plus any commissions. No “return‑of‑capital” or dividend treatment is involved.
Hold the shares (remain a shareholder while the company repurchases on the open market)	You do not recognize any tax event from the buy‑back itself. The repurchase reduces the float and can lift the share price, but the tax impact is deferred until you eventually sell. If you later sell at a higher price, the gain will be measured from your original cost basis, and the holding period will continue to determine the short‑ vs long‑term rate. If the repurchase is treated as a “tender offer” and you refuse, the market‑price uplift is still a capital‑gain when you sell.

 Action 

 Typical tax treatment (U.S.) 

Sell into the buy‑back (i.e., tender shares at the offered price)

The transaction is a realized capital gain or loss. The gain is taxed at the short‑ or long‑term rate depending on how long you have held the stock (≤ 12 months = short‑term ordinary income; > 12 months = long‑term capital‑gain rates, 0 %/15 %/20 % based on your taxable income). The basis is your original purchase price plus any commissions. No “return‑of‑capital” or dividend treatment is involved.

Hold the shares (remain a shareholder while the company repurchases on the open market)

You do not recognize any tax event from the buy‑back itself. The repurchase reduces the float and can lift the share price, but the tax impact is deferred until you eventually sell. If you later sell at a higher price, the gain will be measured from your original cost basis, and the holding period will continue to determine the short‑ vs long‑term rate. If the repurchase is treated as a “tender offer” and you refuse, the market‑price uplift is still a capital‑gain when you sell.

Key practical points for Aflac (AFL) shareholders

Holding period matters. If you have owned AFL for more than a year, selling into the tender now locks in a long‑term capital‑gain rate, which for most taxpayers is lower than the short‑term rate you’d incur if you’ve held the shares < 12 months. If you’re still in the short‑term window, the tax bite could be as high as your marginal ordinary‑income rate.
Wash‑sale considerations. If you sold AFL shares at a loss earlier in the year and then re‑enter the tender, the loss may be disallowed under the wash‑sale rule. Conversely, a profit‑tender does not trigger wash‑sale issues.
State tax impact. Most states follow the federal capital‑gain classification, but a few (e.g., California) tax short‑ and long‑term gains as ordinary income, so the state‑level bite can be significant for short‑term sellers.
Opportunity cost vs. tax deferral. The buy‑back is priced at the current market level (≈ $XX per share). If you expect the price to rise further after the repurchase, holding may deliver a larger capital‑gain—even though the tax is deferred—making the tax‑deferral advantage a component of the total return. If you’re risk‑averse or need liquidity, tendering now locks in a known cash amount and caps the tax exposure at today’s gain.

Actionable take‑away

If you’re a short‑term holder (≤ 12 months) and the tender price is attractive relative to your cost basis, consider tendering now to avoid a potentially higher ordinary‑income tax rate on a future sale.
If you’re a long‑term holder and the market outlook for AFL remains positive, it may be more tax‑efficient to stay invested, let the buy‑back lift the price, and realize the gain later at the long‑term capital‑gain rate. Keep an eye on the remaining authorized repurchase volume; a large‑scale buy‑back can create a price floor that supports a higher exit price when you finally sell.

Other Questions About This News

How will the announced share repurchase program affect Aflic's short‑term stock price and trading volume? What is the total cost of the buyback at current market prices and how does it impact Aflic's cash reserves and capital allocation strategy? How does the size of this buyback (up to 100 million shares) compare to Aflic's historical repurchase activity and to peer companies in the insurance sector? What is the expected timeline for executing the buyback and are there any conditions or caps that could delay or limit the purchases? How might the market interpret this buyback—does it signal confidence in the business outlook or a lack of attractive growth opportunities? Could the repurchase program affect Aflic's credit metrics or leverage ratios, and how will rating agencies view this activity? Is management using the buyback to offset dilution from recent equity issuances, stock‑based compensation, or convertible securities? What potential risks exist if the share repurchase program is under‑subscribed or if market conditions change during the execution period? Will the increased share repurchase lead to a meaningful boost in earnings per share (EPS) and other per‑share metrics?