Enbridge and Spectra Merger

splasher
splasher SuperUser ✭✭✭✭
edited October 2018 in Investing (Windows)
On 2/27/17, the Enbridge / Sprectra merger was completed.
The FAQ states:

"Each share of Spectra Energy common stock will be converted into 0.984 of an Enbridge common share. No fractional Enbridge common shares will be issued; instead, you will receive cash in lieu of any fractional Enbridge common share at USD$42.67 per Enbridge share, less applicable withholding taxes."

I know my 29+ shares of Spectra turn into 28 shares of Enbridge and the partial share is sold.

That all makes sense, but what happens to the cost basis?

Is this best done as a remove / add  or a sell / buy ?

What is the best way to handle it?
-splasher  using Q since 1996 -  Subscription  -  Win10
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Comments

  • mshiggins
    mshiggins SuperUser ✭✭✭✭✭
    edited October 2018
    The FAQ on the merger states it is structured to be tax-free for US tax purposes. So I would use Remove Shares followed by an Add Shares to handle the conversion.


    Here is the link to the referenced FAQ:


    http://www.enbridge.com/investment-ce...

    Your total cost basis remains the same, minus the basis for the fractional shares sold. The per share cost basis increases as the total cost basis is now for less shares. The new per share cost basis will be the old per share cost basis divided by .984.


    Of course, you'll want to confirm this using the 8937 once it is issued and with your tax professional.
    Quicken user since Q1999. Currently using QW2017.
    Questions? Check out the  Quicken Windows FAQ list
  • mshiggins
    mshiggins SuperUser ✭✭✭✭✭
    edited March 2017
    mshiggins said:

    The FAQ on the merger states it is structured to be tax-free for US tax purposes. So I would use Remove Shares followed by an Add Shares to handle the conversion.


    Here is the link to the referenced FAQ:


    http://www.enbridge.com/investment-ce...

    Your total cost basis remains the same, minus the basis for the fractional shares sold. The per share cost basis increases as the total cost basis is now for less shares. The new per share cost basis will be the old per share cost basis divided by .984.


    Of course, you'll want to confirm this using the 8937 once it is issued and with your tax professional.

    Should have asked: how many lots of Spectra did you have? That would impact the mechanics of entering the transaction(s) for the Enbridge shares.
    Quicken user since Q1999. Currently using QW2017.
    Questions? Check out the  Quicken Windows FAQ list
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited March 2017
    mshiggins said:

    The FAQ on the merger states it is structured to be tax-free for US tax purposes. So I would use Remove Shares followed by an Add Shares to handle the conversion.


    Here is the link to the referenced FAQ:


    http://www.enbridge.com/investment-ce...

    Your total cost basis remains the same, minus the basis for the fractional shares sold. The per share cost basis increases as the total cost basis is now for less shares. The new per share cost basis will be the old per share cost basis divided by .984.


    Of course, you'll want to confirm this using the 8937 once it is issued and with your tax professional.

    I would:
    a)  Remove Shares 29+ of Spectra
    b)  Add Shares (29+ times 0.984) of Enbridge using same total cost basis and original acquisition dates or the Spectra shares.  Do that on a lot-by-lot basis as applicable to get to the 29+ total.  Use whatever precision on the share quantity you choose (I'd take it to 0.001 shares).    
    c)  Sell final fractional share of Enbridge to reduce your holding to the final 28 shares.  See what your actual cash-in-lieu number is rather than directly using the $42.67/share.    

    Other comments by mshiggins were right on IMO.  
  • splasher
    splasher SuperUser ✭✭✭✭
    edited March 2017
    mshiggins said:

    The FAQ on the merger states it is structured to be tax-free for US tax purposes. So I would use Remove Shares followed by an Add Shares to handle the conversion.


    Here is the link to the referenced FAQ:


    http://www.enbridge.com/investment-ce...

    Your total cost basis remains the same, minus the basis for the fractional shares sold. The per share cost basis increases as the total cost basis is now for less shares. The new per share cost basis will be the old per share cost basis divided by .984.


    Of course, you'll want to confirm this using the 8937 once it is issued and with your tax professional.

    @mshiggins Reinvested dividends at 4/year since 2007, so about 40 lots.

    Thanks to both, I figured that was what it was going to take, but I wanted a confirmation from my more knowledgeable friends of investment techniques.
    -splasher  using Q since 1996 -  Subscription  -  Win10
    -also older versions as needed for testing
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  • Jerry_
    Jerry_ Member ✭✭✭✭
    edited March 2017
    mshiggins said:

    The FAQ on the merger states it is structured to be tax-free for US tax purposes. So I would use Remove Shares followed by an Add Shares to handle the conversion.


    Here is the link to the referenced FAQ:


    http://www.enbridge.com/investment-ce...

    Your total cost basis remains the same, minus the basis for the fractional shares sold. The per share cost basis increases as the total cost basis is now for less shares. The new per share cost basis will be the old per share cost basis divided by .984.


    Of course, you'll want to confirm this using the 8937 once it is issued and with your tax professional.

    I am in the same situation with my Spectra Holdings. Thank you all for your informative discussion,
    Now running the 2019 Windows Subscription Plan
    Retired - former Computer System Analyst
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited March 2017
    mshiggins said:

    The FAQ on the merger states it is structured to be tax-free for US tax purposes. So I would use Remove Shares followed by an Add Shares to handle the conversion.


    Here is the link to the referenced FAQ:


    http://www.enbridge.com/investment-ce...

    Your total cost basis remains the same, minus the basis for the fractional shares sold. The per share cost basis increases as the total cost basis is now for less shares. The new per share cost basis will be the old per share cost basis divided by .984.


    Of course, you'll want to confirm this using the 8937 once it is issued and with your tax professional.

    From the practical standpoint (caveat:  I am not a tax pro ... ), I do think it is passable to group all current long-term holdings into one lot,and then just have the recent reinvestments as short term holdings in their separate lots.  I would note that consolidation in the LT lot memo field.  If you have no intention of selling the Enbridge shares in the next year, you could even group them all into one lot.

    I don't believe any of the performance measurements use the acquisition dates.  Those dates are only applicable for cap gains determination (AFAIK).  There is no ramification that way due to that type of consolidation.    

    I tend to be anal about such details and would still do things on a lot-by-lot basis (my personal choice - YMMV).

    As I think about it, I do believe you can also use the Corporate Acquisition macro-transaction to accomplish the same task (Enbridge aquires Spectra at a 0.984 share ratio).  That should generate all the Add Share transactions but they will be at a 6-decimal digit precision level, which I would then individually edit back to something more manageable and less precise.
  • splasher
    splasher SuperUser ✭✭✭✭
    edited October 2018
    Well, that was a lot of fun. 
    1. The process I followed was to sort my register by Security to get all of the Spectra transactions (buys, reinvdiv) in one group.
    2. Started at the top, selected a transaction, did a right-click Copy Transaction.
    3. Scrolled to the bottom of the register, clicked on the "blank" line and did a right-click Paste Transaction.
    4. That entered the transaction and put it into edit mode
    5. Changed the buy or reinvdiv to Add
    6. Changed the Security to Enbridge
    7. Tweaked the shares to .984*shares
    8. That caused the share price to recalculate, keeping the total cost the same.
    9. Added/changed the memo to something meaningful
    10. Saved it and back to step 2 with the next transaction (40 more times)
    The
    advantage I found in doing it this way was that I did not have to enter
    the dates and total cost since it was in the pasted transaction.  Saved
    a bunch of potential mistakes that way.
    -splasher  using Q since 1996 -  Subscription  -  Win10
    -also older versions as needed for testing
    -Questions? Check out the  Quicken Windows FAQ list
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited March 2017
    splasher said:

    Well, that was a lot of fun. 

    1. The process I followed was to sort my register by Security to get all of the Spectra transactions (buys, reinvdiv) in one group.
    2. Started at the top, selected a transaction, did a right-click Copy Transaction.
    3. Scrolled to the bottom of the register, clicked on the "blank" line and did a right-click Paste Transaction.
    4. That entered the transaction and put it into edit mode
    5. Changed the buy or reinvdiv to Add
    6. Changed the Security to Enbridge
    7. Tweaked the shares to .984*shares
    8. That caused the share price to recalculate, keeping the total cost the same.
    9. Added/changed the memo to something meaningful
    10. Saved it and back to step 2 with the next transaction (40 more times)
    The
    advantage I found in doing it this way was that I did not have to enter
    the dates and total cost since it was in the pasted transaction.  Saved
    a bunch of potential mistakes that way.
    A variation on that process:
    1)  On the merger date, enter a Shares Transferred moving the existing Spectra holding to the same account.  That generates the one Remove Shares and all the Add Shares transactions.  All the Add Shares have the correct date (merger date) and the correct (original) acquisition date

    For each of those Add Shares
    2) Change the Security to Enbridge
    3) Tweak the shares to .984*shares.  That causes the share price to recalculate, keeping the total cost the same.
    4) Add/change the memo to something meaningful (Paste same copy in each time if applicable)
    5)  Save the edited transaction and step down to the next Add Shares.  Repeat at #2.

    And of course, you backed up first.  Just in case.
  • splasher
    splasher SuperUser ✭✭✭✭
    edited March 2017
    splasher said:

    Well, that was a lot of fun. 

    1. The process I followed was to sort my register by Security to get all of the Spectra transactions (buys, reinvdiv) in one group.
    2. Started at the top, selected a transaction, did a right-click Copy Transaction.
    3. Scrolled to the bottom of the register, clicked on the "blank" line and did a right-click Paste Transaction.
    4. That entered the transaction and put it into edit mode
    5. Changed the buy or reinvdiv to Add
    6. Changed the Security to Enbridge
    7. Tweaked the shares to .984*shares
    8. That caused the share price to recalculate, keeping the total cost the same.
    9. Added/changed the memo to something meaningful
    10. Saved it and back to step 2 with the next transaction (40 more times)
    The
    advantage I found in doing it this way was that I did not have to enter
    the dates and total cost since it was in the pasted transaction.  Saved
    a bunch of potential mistakes that way.
    A backup was my first action, always is.

    I like your process better.  The Shares Transferred to the same account is a slick trick and would have saved me a lot of scrolling from Spectra to the bottom and back to Spectra for each transaction.
    -splasher  using Q since 1996 -  Subscription  -  Win10
    -also older versions as needed for testing
    -Questions? Check out the  Quicken Windows FAQ list
  • Jerry_
    Jerry_ Member ✭✭✭✭
    edited March 2017
    splasher said:

    Well, that was a lot of fun. 

    1. The process I followed was to sort my register by Security to get all of the Spectra transactions (buys, reinvdiv) in one group.
    2. Started at the top, selected a transaction, did a right-click Copy Transaction.
    3. Scrolled to the bottom of the register, clicked on the "blank" line and did a right-click Paste Transaction.
    4. That entered the transaction and put it into edit mode
    5. Changed the buy or reinvdiv to Add
    6. Changed the Security to Enbridge
    7. Tweaked the shares to .984*shares
    8. That caused the share price to recalculate, keeping the total cost the same.
    9. Added/changed the memo to something meaningful
    10. Saved it and back to step 2 with the next transaction (40 more times)
    The
    advantage I found in doing it this way was that I did not have to enter
    the dates and total cost since it was in the pasted transaction.  Saved
    a bunch of potential mistakes that way.
    I also like the "Shares transferred to the same account" process too. Thanks!!
    Now running the 2019 Windows Subscription Plan
    Retired - former Computer System Analyst
  • splasher
    splasher SuperUser ✭✭✭✭
    edited October 2018
    The one thing I forgot to mention is that if you owned Spectra prior to June'2011 and keep the original transaction dates post the merger, an Enbridge split of that date will try to insert itself, so you have to tell Quicken to ignore it because it does not apply to the aftereffect of the merger.
    -splasher  using Q since 1996 -  Subscription  -  Win10
    -also older versions as needed for testing
    -Questions? Check out the  Quicken Windows FAQ list
  • Unknown
    Unknown Member
    edited April 2017
    splasher said:

    Well, that was a lot of fun. 

    1. The process I followed was to sort my register by Security to get all of the Spectra transactions (buys, reinvdiv) in one group.
    2. Started at the top, selected a transaction, did a right-click Copy Transaction.
    3. Scrolled to the bottom of the register, clicked on the "blank" line and did a right-click Paste Transaction.
    4. That entered the transaction and put it into edit mode
    5. Changed the buy or reinvdiv to Add
    6. Changed the Security to Enbridge
    7. Tweaked the shares to .984*shares
    8. That caused the share price to recalculate, keeping the total cost the same.
    9. Added/changed the memo to something meaningful
    10. Saved it and back to step 2 with the next transaction (40 more times)
    The
    advantage I found in doing it this way was that I did not have to enter
    the dates and total cost since it was in the pasted transaction.  Saved
    a bunch of potential mistakes that way.
    I tried this method. When I transferred the Spectra shares, it did not affect my running total in the monthly transactions. However when I added the Enbridge Inc shares which asks for a value, it affected the running total in my monthly transaction page.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited April 2017
    splasher said:

    Well, that was a lot of fun. 

    1. The process I followed was to sort my register by Security to get all of the Spectra transactions (buys, reinvdiv) in one group.
    2. Started at the top, selected a transaction, did a right-click Copy Transaction.
    3. Scrolled to the bottom of the register, clicked on the "blank" line and did a right-click Paste Transaction.
    4. That entered the transaction and put it into edit mode
    5. Changed the buy or reinvdiv to Add
    6. Changed the Security to Enbridge
    7. Tweaked the shares to .984*shares
    8. That caused the share price to recalculate, keeping the total cost the same.
    9. Added/changed the memo to something meaningful
    10. Saved it and back to step 2 with the next transaction (40 more times)
    The
    advantage I found in doing it this way was that I did not have to enter
    the dates and total cost since it was in the pasted transaction.  Saved
    a bunch of potential mistakes that way.
    @Doreen Gryfe:  I do not know what "this method" refers to specifically.  There are several variations presented.  

    I do not know what "in the monthly transactions" or "in my monthly transactions page" refers to.  Is that referring to the transaction list for the account?

    I do not know how you "added the Enbridge Inc shares".  

    More information is required for me to offer a cogent response.
  • Unknown
    Unknown Member
    edited April 2017
    I used the Corporate Acquisition (stock for stock) function.  I entered 0.984 new shares for each old share and the appropriate corporate names.  Quicken did the conversion on a lot by lot basis.  I did end up with fractional shares of Enbridge  When my brokerage statement told me that I received cash in lieu, I entered a Sold transaction for the fractional share for the amount of cash received.,  Everything converted perfectly, my cost basis was preserved along with my acquisition dates for each lot I purchased over the years.
  • Unknown
    Unknown Member
    edited April 2017
    David Toelkes suggested "Corporate Acquistion" function.  That worked perfectly thanks.  Everyone should use that approach. 
This discussion has been closed.