ROVI acquisition of TIVO

Joe7

How do we enter the ROVI acquisition of TIVO.  From what I understand, Tivo owners receive $2.75 per share and 0.3853 shares of the new stock.

NotACPA

What Q product, and what OpSys are you running?  How to record in QMac isn't the same as in QWin.  Also, which flavor of Q matters.

Joe7

2015 Home & Business working in conjunction with Windows 7.

Appreciate any advice for the entry of this acquisition as it is cash + .3835 shares of the shares that I have.

NotACPA

Record the cash as either a Dividend or "Return of Capital".  The documents from the broker (or ROVI) will tell you which. 
Use the "Corporate Acquisition (stock for stock)" for the shares.

All 3 of these possible actions are available in H&B, in investment accounts.

Joe7

Thank you again.  If I am showing the cash per share as a divy or ROC, Does that mean that I am going to use my original cost basis on the 1000 shares purchased for the 385 that I now will have? 

NotACPA

Joe said:

Thank you again.  If I am showing the cash per share as a divy or ROC, Does that mean that I am going to use my original cost basis on the 1000 shares purchased for the 385 that I now will have? 

An ROC will reduce your cost basis by $2.75 per share.  A Div will maintain the same cost basis.  Q will make this calculation for you, depending upon the appropriate (per the legal documents of the acquisition), action taken, Div or CorpAcq.

Cost basis info isn't needed for the CorpAcq transaction.  Only the name of the 2 companies, the number of new (i.e., ROVI) shares that you receive and the price of ROVI after the acquisition are needed.

Joe7

Joe said:

Thank you again.  If I am showing the cash per share as a divy or ROC, Does that mean that I am going to use my original cost basis on the 1000 shares purchased for the 385 that I now will have? 

Much appreciated.  I will call the corporate office of ROVI to see how they advise to handle the cash per share.  Thank you again.

NotACPA

Joe said:

Thank you again.  If I am showing the cash per share as a divy or ROC, Does that mean that I am going to use my original cost basis on the 1000 shares purchased for the 385 that I now will have? 

I've been doing some reading up on this CorpAcq.  It appears that you'll also be getting some cash in lieu of fractional share AND that the successor company will be named TIVO. 

SO, the CorpAcq transaction will leave you with 385.3 shs of Rovi (1000 Tivo times .3853), whereupon the 0.3 shares will be immediately sold, providing more cash.  You'll need to input a Sell transaction into Q for this.

Do a Corp Name Change transaction, in Q, to reflect that the TIVO name will be used by the successor company.  You might need to you current Tivo to "Tivo Old" before you do any of this (including the initial CorpAcq), because I don't believe that Q will let you use TIVO for the Corp Name Change if Tivo already exists.

Lastly, it looks like the $2.75/sh cash is a dividend ... but I'm far from certain about that.  Checking with the company is a good idea.

q_lurker

Alternate answer:  
It is all a matter of how closely you want your Quicken data to reflect the tax consequences - current and future.

Per the FAQ portion of the prospectus for this merger:  

U.S. holders of TiVo common stock generally will recognize gain, but not loss, on the exchange of
TiVo common stock for a combination of New Parent common stock and cash equal to the lesser of:

(1) the excess, if any, of (i) the sum of the fair market value of New Parent common stock
received in the TiVo merger and the amount of cash received in the TiVo merger over (ii) the
stockholder’s tax basis in the TiVo common stock surrendered in the TiVo merger, and

(2) the amount of cash received by such stockholder in the TiVo merger.

What I usually translate that to is:
a)  you sell your shares of Tivo at an applicable price raising cash
b)  you buy shares of Rovi for part of that cash, the remainder of the cash being cash you actually received
c)  you remove the shares of Rovi you just bought
d)  you add back the same quantity of shares of Rovi you just removed, this time showing the original acquisition date so future LT/ST gain issues are addressed correctly.
e)  you sell any fractional shares of Rovi for a cash-in-lieu amount you received.  

Now that the transactions are complete, you can rename Rovi to the "new Tivo".  In doing that, I would re-ticker the original Tivo as TIVO(old) copying the price history data, and deleting the old (TIVO) price history.  Then I would update the Rovi to the TIVO ticker.

An applicable price:  Needs to be determined on a lot-by-lot basis.  You received $2.75 in cash for each share of old Tivo you held.  You also received 0.3853 shares of Rovi stock which the press release values at $20.6344 / Rovi share representing $7.95 in value.  You total value received was $10.70 per old Tivo share that you held.    

If you bought your Tivo shares in this lot for more than $10.70, this transaction represents a loss for you, but you do not get to claim that loss at this time.  You would sell your original Tivo lot for your cost basis of that lot and buy the Rovi shares for less money leaving the $2.75/Tivo share as cash.

If you bought your Tivo shares in this lot cheaply (less than $7.95 / share), then all the cash you received ($2.75 / share) is capital gains at this time.  Sell this lot for basis + $2.75/share.  Buy the Rovi shares for the lesser amount (total basis less the $2.75/Tivo share).  

If you bought your Tivo shares for between $7.95 and $10.70/share, then you have some cap gain liablility but less thn the $2.75/Tivo share.  In this case, sell this lot for $10.70 (the value received) / Tivo share, and buy up the Rovi shares for the lesser amount leaving the $2.75 as cash in the account..

With some reading between the lines (and excluding typos and brain cramps), that is the way I would be proceeding if I owned the original Tivo shares.  It is frankly better to work this out on paper or spreadsheet first before jumping into Quicken with this.  It is also important to have a good backup available when you do start the Quicken exercise.  

The cash you received is not dividend income and may or may not be capital gain income.  

HTH.  

Joe7

Your comment: If you bought your Tivo shares in this lot for more than $10.70, this transaction represents a loss for you, but you do not get to claim that loss at this time.  You would sell your original Tivo lot for your cost basis of that lot and buy the Rovi shares for less money leaving the $2.75/Tivo share as cash.
If I understand this correctly, My cost basis was 1000 shares @ $11.50. Are you saying to enter a SELL @ 11.50 for the original shares showing a wash and then enter a new buy for the NEW TIVO at $20.63 less $2.75 for 385 shares??  The way I see this, I have no loss on the original TIVO and a gain on the new Tivo.  What am I missing? 

q_lurker

Joe said:

Your comment: If you bought your Tivo shares in this lot for more than $10.70, this transaction represents a loss for you, but you do not get to claim that loss at this time.  You would sell your original Tivo lot for your cost basis of that lot and buy the Rovi shares for less money leaving the $2.75/Tivo share as cash.
If I understand this correctly, My cost basis was 1000 shares @ $11.50. Are you saying to enter a SELL @ 11.50 for the original shares showing a wash and then enter a new buy for the NEW TIVO at $20.63 less $2.75 for 385 shares??  The way I see this, I have no loss on the original TIVO and a gain on the new Tivo.  What am I missing? 

Not quite.  

You would sell the 1000 TIVO for $11,500 (your cost basis)
You keep as cash 1000 * 2.75 = $2,750 (tax free) 
You buy 385.3 shares of Rovi of $8,750 (effectively 22.71 / Rovi share)
(Sell the 0.3 shares for what your broker should be reporting as cash-in-lieu = $6 to $7 range.)

With Rovi (now the new Tivo) trading at about $22/share, your 385 shares are worth about $8,500 vs your new basis of $8,750.  You would currently be sitting on a small loss.  

Rascal

My TIVO stock was in an IRA so no tax ramifications on my reorg..
I recorded a divident for the cash part of the transaction... could have done return of capital... in IRA it is the same..
applied a reverse stock split per the exchange ratio that led to fractional shares, which is fine
entered misc exp for $20 reorg fee by Etrade
then sold the fractional share at the quoted amount...
a total of 4 transactions for my situation
No name change transaction was required due to me owning TIVO not TOVI shares originally
so the only outstanding issue if these shares were in a brokerge acct instead of IRA, do the now r.split share balance carry the original purchase date and was is the basis when shares are sold... again doesn't affect me (tax consequences) for a transaction in an IRA since it will all be tax at retirement (withdrawal time)... it is not a ROTH IRA but Standard one.

q_lurker

James Clark said:

My TIVO stock was in an IRA so no tax ramifications on my reorg..
I recorded a divident for the cash part of the transaction... could have done return of capital... in IRA it is the same..
applied a reverse stock split per the exchange ratio that led to fractional shares, which is fine
entered misc exp for $20 reorg fee by Etrade
then sold the fractional share at the quoted amount...
a total of 4 transactions for my situation
No name change transaction was required due to me owning TIVO not TOVI shares originally
so the only outstanding issue if these shares were in a brokerge acct instead of IRA, do the now r.split share balance carry the original purchase date and was is the basis when shares are sold... again doesn't affect me (tax consequences) for a transaction in an IRA since it will all be tax at retirement (withdrawal time)... it is not a ROTH IRA but Standard one.

do the now r.split share balance carry the original purchase date and was is the basis when shares are sold... 

Something got scrambled in that part of your message.  

IMO, the same process should be used regardless of the account type.  A rigorous process will make it easier to get realistic performance calculations (in particular, average annual return, aka IRR), but that is not a need for everyone.  YMMV.

Glad you found a solution that fits your needs.  
 

Rascal

James Clark said:

My TIVO stock was in an IRA so no tax ramifications on my reorg..
I recorded a divident for the cash part of the transaction... could have done return of capital... in IRA it is the same..
applied a reverse stock split per the exchange ratio that led to fractional shares, which is fine
entered misc exp for $20 reorg fee by Etrade
then sold the fractional share at the quoted amount...
a total of 4 transactions for my situation
No name change transaction was required due to me owning TIVO not TOVI shares originally
so the only outstanding issue if these shares were in a brokerge acct instead of IRA, do the now r.split share balance carry the original purchase date and was is the basis when shares are sold... again doesn't affect me (tax consequences) for a transaction in an IRA since it will all be tax at retirement (withdrawal time)... it is not a ROTH IRA but Standard one.

It is unclear to me if the purchase basis date changes, it would not matter in my case where shares are in a pre-tax (Non Roth) IRA.  That money hasn't been taxed yet.  I think you would have to research that further if your shares are in a regular brokerage account with immediate (or annual tax prep) tax consequences.  What I meant by the dividend vs. capital return in my case being the same, is once again no tax consequences in an IRA.. whereas there might or would be in a brokerage acct.  Sorry for the typos, I guess I was getting tired when right "divident" and "TOVI".

q_lurker

James Clark said:

My TIVO stock was in an IRA so no tax ramifications on my reorg..
I recorded a divident for the cash part of the transaction... could have done return of capital... in IRA it is the same..
applied a reverse stock split per the exchange ratio that led to fractional shares, which is fine
entered misc exp for $20 reorg fee by Etrade
then sold the fractional share at the quoted amount...
a total of 4 transactions for my situation
No name change transaction was required due to me owning TIVO not TOVI shares originally
so the only outstanding issue if these shares were in a brokerge acct instead of IRA, do the now r.split share balance carry the original purchase date and was is the basis when shares are sold... again doesn't affect me (tax consequences) for a transaction in an IRA since it will all be tax at retirement (withdrawal time)... it is not a ROTH IRA but Standard one.

It is unclear to me if the purchase basis date changes, ... 

It is my understanding that the basis date does not change.  (In some cases it does change).  That is why in my steps c) and d) above, I Remove Shares and Add Shares -- to reset the acquisition date back to that of the original lot.  

As you note, such an issue is not applicable in a retirement account.  At the same time, I see no harm in doing that within the retirement account.  Personal choice.   

Rascal

James Clark said:

My TIVO stock was in an IRA so no tax ramifications on my reorg..
I recorded a divident for the cash part of the transaction... could have done return of capital... in IRA it is the same..
applied a reverse stock split per the exchange ratio that led to fractional shares, which is fine
entered misc exp for $20 reorg fee by Etrade
then sold the fractional share at the quoted amount...
a total of 4 transactions for my situation
No name change transaction was required due to me owning TIVO not TOVI shares originally
so the only outstanding issue if these shares were in a brokerge acct instead of IRA, do the now r.split share balance carry the original purchase date and was is the basis when shares are sold... again doesn't affect me (tax consequences) for a transaction in an IRA since it will all be tax at retirement (withdrawal time)... it is not a ROTH IRA but Standard one.

It is simply not needed in a retirement account... shortcuts I tell you - shortcuts.

Unknown

q.lurker said:

Alternate answer:  
It is all a matter of how closely you want your Quicken data to reflect the tax consequences - current and future.

Per the FAQ portion of the prospectus for this merger:  

U.S. holders of TiVo common stock generally will recognize gain, but not loss, on the exchange of
TiVo common stock for a combination of New Parent common stock and cash equal to the lesser of:

(1) the excess, if any, of (i) the sum of the fair market value of New Parent common stock
received in the TiVo merger and the amount of cash received in the TiVo merger over (ii) the
stockholder’s tax basis in the TiVo common stock surrendered in the TiVo merger, and

(2) the amount of cash received by such stockholder in the TiVo merger.

What I usually translate that to is:
a)  you sell your shares of Tivo at an applicable price raising cash
b)  you buy shares of Rovi for part of that cash, the remainder of the cash being cash you actually received
c)  you remove the shares of Rovi you just bought
d)  you add back the same quantity of shares of Rovi you just removed, this time showing the original acquisition date so future LT/ST gain issues are addressed correctly.
e)  you sell any fractional shares of Rovi for a cash-in-lieu amount you received.  

Now that the transactions are complete, you can rename Rovi to the "new Tivo".  In doing that, I would re-ticker the original Tivo as TIVO(old) copying the price history data, and deleting the old (TIVO) price history.  Then I would update the Rovi to the TIVO ticker.

An applicable price:  Needs to be determined on a lot-by-lot basis.  You received $2.75 in cash for each share of old Tivo you held.  You also received 0.3853 shares of Rovi stock which the press release values at $20.6344 / Rovi share representing $7.95 in value.  You total value received was $10.70 per old Tivo share that you held.    

If you bought your Tivo shares in this lot for more than $10.70, this transaction represents a loss for you, but you do not get to claim that loss at this time.  You would sell your original Tivo lot for your cost basis of that lot and buy the Rovi shares for less money leaving the $2.75/Tivo share as cash.

If you bought your Tivo shares in this lot cheaply (less than $7.95 / share), then all the cash you received ($2.75 / share) is capital gains at this time.  Sell this lot for basis + $2.75/share.  Buy the Rovi shares for the lesser amount (total basis less the $2.75/Tivo share).  

If you bought your Tivo shares for between $7.95 and $10.70/share, then you have some cap gain liablility but less thn the $2.75/Tivo share.  In this case, sell this lot for $10.70 (the value received) / Tivo share, and buy up the Rovi shares for the lesser amount leaving the $2.75 as cash in the account..

With some reading between the lines (and excluding typos and brain cramps), that is the way I would be proceeding if I owned the original Tivo shares.  It is frankly better to work this out on paper or spreadsheet first before jumping into Quicken with this.  It is also important to have a good backup available when you do start the Quicken exercise.  

The cash you received is not dividend income and may or may not be capital gain income.  

HTH.  I followed the initial part of your answer but am unable to follow you fully on the applicable price section.

Instead, on paper I came up with the following calculation (assuming a single lot for simplicity but can also work with multiple lots if you do this per lot):

- I had N1 shares of TIVO with a cost basis C1
- After the merger, I got N2 shares of ROVI and cash $X.
- I can determine the FMV of ROVI from the historical data on that date, and let's say it is R.

(N2 * R) + X = Total worth of my TIVO stock at the time of conversion
So the fraction X / (N2 * R) represents the portion of my total TIVO stock which was sold for cash.

The fractional cost basis C2 corresponding to the portion which was sold for cash: C2 = C1 * (X / (N2 * R))

The remaining cost basis C3 corresponds to the ROVI stock I'm still holding after the conversion and is the cost basis to use when I actually sell the ROVI stock in the future. C3 = C1 - C2.
The purchase date for all the ROVI stocks should be the date when I had purchased the TIVO stock.

On paper, this seems to add up. Although, I'm not sure if there will be any issue if I report it this way on my tax returns.

What are your thoughts?

q_lurker

q.lurker said:

Alternate answer:  
It is all a matter of how closely you want your Quicken data to reflect the tax consequences - current and future.

Per the FAQ portion of the prospectus for this merger:  

U.S. holders of TiVo common stock generally will recognize gain, but not loss, on the exchange of
TiVo common stock for a combination of New Parent common stock and cash equal to the lesser of:

(1) the excess, if any, of (i) the sum of the fair market value of New Parent common stock
received in the TiVo merger and the amount of cash received in the TiVo merger over (ii) the
stockholder’s tax basis in the TiVo common stock surrendered in the TiVo merger, and

(2) the amount of cash received by such stockholder in the TiVo merger.

What I usually translate that to is:
a)  you sell your shares of Tivo at an applicable price raising cash
b)  you buy shares of Rovi for part of that cash, the remainder of the cash being cash you actually received
c)  you remove the shares of Rovi you just bought
d)  you add back the same quantity of shares of Rovi you just removed, this time showing the original acquisition date so future LT/ST gain issues are addressed correctly.
e)  you sell any fractional shares of Rovi for a cash-in-lieu amount you received.  

Now that the transactions are complete, you can rename Rovi to the "new Tivo".  In doing that, I would re-ticker the original Tivo as TIVO(old) copying the price history data, and deleting the old (TIVO) price history.  Then I would update the Rovi to the TIVO ticker.

An applicable price:  Needs to be determined on a lot-by-lot basis.  You received $2.75 in cash for each share of old Tivo you held.  You also received 0.3853 shares of Rovi stock which the press release values at $20.6344 / Rovi share representing $7.95 in value.  You total value received was $10.70 per old Tivo share that you held.    

If you bought your Tivo shares in this lot for more than $10.70, this transaction represents a loss for you, but you do not get to claim that loss at this time.  You would sell your original Tivo lot for your cost basis of that lot and buy the Rovi shares for less money leaving the $2.75/Tivo share as cash.

If you bought your Tivo shares in this lot cheaply (less than $7.95 / share), then all the cash you received ($2.75 / share) is capital gains at this time.  Sell this lot for basis + $2.75/share.  Buy the Rovi shares for the lesser amount (total basis less the $2.75/Tivo share).  

If you bought your Tivo shares for between $7.95 and $10.70/share, then you have some cap gain liablility but less thn the $2.75/Tivo share.  In this case, sell this lot for $10.70 (the value received) / Tivo share, and buy up the Rovi shares for the lesser amount leaving the $2.75 as cash in the account..

With some reading between the lines (and excluding typos and brain cramps), that is the way I would be proceeding if I owned the original Tivo shares.  It is frankly better to work this out on paper or spreadsheet first before jumping into Quicken with this.  It is also important to have a good backup available when you do start the Quicken exercise.  

The cash you received is not dividend income and may or may not be capital gain income.  

HTH.  @Tuxdude:

(N2 * R) + X = Total worth of my TIVO stock at the time of conversion 

You are fine through that point which I identified as Total Received.  Based on the figures I used, that was $10.70/TIVO share.  If you use an R value different than my $20.6344/share, you'll have something slightly different than $10.70.  In your algebra, I'd write
[(N2 * R) + X] / N1 = 
[(N2/N1 * R) + X / N1] = 
[(0.3853 * 20.6344) + 2.75] = 7.95 + 2.75 = 10.70 / TIVO share = Value received per share, or 
10.70 * N1 = Total worth of your TIVO stock at the time of conversion

From there, you are trying to determine how much of the cash received (2.75/Tivo Share or 2.75 * N1) is considered capital gains.

If you paid a lot for the TIVO holding (more than $10.70/share), you are at a net loss position at the time of the merger, and none of the cash received is taxable as capital gains at this time.  

If you bought TIVO cheaply (less than 7.95 / share), you are at a net gain on this holding; the net gain is greater than the cash received; but the capital gains income you are required to report is limited to the 2.75/share cash actually received.  

If you  got into TIVO in-between those values, your cap gain income is in-between 2.75/share and 0.00.  

So it is not that some shares where (effectively) sold for cash and some were exchanged for RIVO.  

Following with your algebra:
Bought TIVO high (over 10.70/share)

• Sell N1 TIVO for C1 (price/share = C1 / N1)
• Cash Available = C1
• Buy N2 RIVO for C1 - 2.75 * N1
• Cash Left = 2.75 * N1

Bought TIVO low (less than 7.95/share)

• Sell N1 TIVO for C1 + 2.75 * N1 (price/share = C1 / N1 + 2.75)
• Cash Available = C1 + 2.75 * N1
• Buy N2 RIVO for C1 
• Cash Left = 2.75 * N1

Bought TIVO in-between

• Sell N1 TIVO for 10.70 * N1 (price/share = 10.70)
• Cash Available = 10.70 * N1
• Buy N2 RIVO for 7.95 * N1 (<<< yes, that is N1 so that the next line comes out right)
• Cash Left = 2.75 * N1

Cash left is always the 2.75 / TIVO share that you received in cash as part of this deal.  

The purchase date for all the ROVI stocks should be the date when I had purchased the TIVO stock.

That is the final effect you need.  But if you are showing these sales today (date of merger) and recording the buys months or years ago, your cash balance in the interim is going to be royally messed up.  In addition, you'll be seeing that you historically owned RIVO when you didn't which is also majorly confusing.  My approach to deal with those issues is to do the Sells and the Buys "today" (= date of merger), then to enter REMOVE SHARES just bought and ADD SHARES with the correct acquisition date and the cost basis just determined.  

And yes, you are right to handle each lot the same way; through the same logic.  They may not all be the same.  

Finally, the last step is to manage the sale of any fractional share of RIVO for the cash-in-lieu amount received (that is, N2 as used in my algebra above is always 0.3853 * N1).  N2 is not the integer number of shares that showed up in your account on merger date.

Although, I'm not sure if there will be any issue if I report it this way on my tax returns.

Since I am not a CPA or tax pro, I could not begin to comment on what might happen with your tax returns, nor should you listen to me if I did.  And if I did claim to be a tax pro, you still shouldn't listen to me.  I'm a frickin' guy on a keyboard on the internet.

Those are my thoughts.