How to enter corporate action (acquisition/merger) which includes BOTH shares and cash parts
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From: jainraje on 24 Nov 2009 19:17 Hi, Any suggestions on how to handle a merger between two companies that includes both cash and stock conversions? Questions that come to mind: 1) How to capture tax implications of the transaction 2) How to handle cost basis for the new stock Hopefully I'm not the only one looking for the above answers. The recent merger of SGP and MRK would be a great working example. Here is link to the document detailing tax implicantions: http://www.merck.com/investors/stockholder-services/Merck_Tax_Summary_For_Website.pdf I copied the subject from a thread on the quicken website but there was no clear answer contained in the thread. Thanks, --Rajeev
From: R. C. White on 25 Nov 2009 09:33
Hi, Rajeev. That Merck/Schering-Plough merger described in the link you gave is a great example of how to handle THAT transaction. But that does not necessarily apply to ANY OTHER transaction. While we can learn from studying such examples, each transaction is unique. Tax effects can turn on a single factor that may be different from the "example" transaction, producing quite different results for the shareholder. Can you tell us WHICH two companies were involved in the merger you are asking about? A link to the website of at least one of them should help us find the Investor Relations page there to read and (hopefully) understand the details of THAT transaction. Also, please tell us which company's shares you held before the transaction; it's hard to get the right perspective from which to view the transaction unless we know that. The view is different from Company A, Company B, Company A's shareholders, Company B's shareholders - and for an interested bystander, such as a CPA trying to understand the whole picture. We did discuss a cash-and-stock merger here recently. See the thread, "How do I handle the recent merger of Pfizer and Wyeth", started by "oldman(a)old.net" on 10/18/09. As I said above, the facts of each case are unique, so this is not likely to completely answer your questions, but it might help. (We've not heard back from oldman, so we don't know if my advice in that thread was helpful - or if it was discussed with oldman's tax advisor.) But, as is so often said, "The devil is in the details." And you've given us no details yet. Also, as I frequently remind readers here, I've been retired for nearly two decades, so be sure to consult with your own CPA or other competent advisor about all this. RC -- R. C. White, CPA San Marcos, TX (Retired. No longer licensed to practice public accounting.) rc(a)grandecom.net Microsoft Windows MVP (Using Quicken Deluxe 2010 and Windows Live Mail in Win7 x64) "jainraje" <jainraje(a)gmail.com> wrote in message news:6c5ba655-3b52-46f5-b3d8-2872bc2ccde0(a)s21g2000prm.googlegroups.com... > Hi, > Any suggestions on how to handle a merger between two companies that > includes both cash and stock conversions? > > Questions that come to mind: > 1) How to capture tax implications of the transaction > 2) How to handle cost basis for the new stock > > Hopefully I'm not the only one looking for the above answers. > > The recent merger of SGP and MRK would be a great working example. > > Here is link to the document detailing tax implicantions: > http://www.merck.com/investors/stockholder-services/Merck_Tax_Summary_For_Website.pdf > > I copied the subject from a thread on the quicken website but there > was no clear answer contained in the thread. > > Thanks, > --Rajeev |