What are the expected tax and liquidity implications for JPI shareholders who convert their holdings into JPC?

Tax implication

Because the merger is being carried out as a stock‑for‑stock exchange of one Nuveen preferred‑security closed‑end fund for another, the conversion is treated by the IRS as a tax‑free “reorganization.” JPI shareholders will not recognize a gain or loss at the moment of the exchange; instead, the tax basis and holding period of their original JPI shares are carried over to the newly received JPC shares. The only taxable event that can arise later is the eventual sale of the JPC shares (or the receipt of any cash‑‑in‑‑‑kind distributions that might be made as part of the merger). If the merger were structured as a cash‑‑in‑‑‑like distribution, the cash portion would be taxable in the year received, but the press release indicates a pure share‑exchange, so the conversion itself should be non‑taxable for most individual investors.

Liquidity implication

JPC is a larger, more widely held preferred‑security fund than JPI, with higher daily trading volume and tighter bid/ask spreads on the NYSE. By moving into JPC, former JPI holders inherit that improved market depth: the likelihood of filling sizable orders at or near the prevailing NAV‑based price increases, and the cost of trading (price slippage) should fall. However, the post‑merger liquidity profile will still reflect the Net Asset Value (NAV) of the combined pool; the conversion ratio will be set to equate the per‑share NAVs of the two funds at the time of the merger. In practice, investors can expect a modest uplift in trade execution quality, but any short‑term “conversion‑date” volatility will be limited because the exchange is not a taxable liquidation and does not trigger a cash outflow.

Actionable takeaway

For JPI shareholders, the primary consideration is not an immediate tax bill but the timing of the conversion (expected < Sept 22 2025). The move into JPC offers better liquidity and potentially more efficient price discovery, so there is little downside to staying invested post‑conversion. If you prefer a cleaner exit, you could sell the JPC shares after the merger once the market has absorbed the conversion and the spread has narrowed; otherwise, holding the JPC position offers the same exposure to the underlying preferred‑security portfolio with a more liquid trading environment.