BTI just bought RAI for $29.44 cash and .526 shares per 1 share of RAI. How do I enter this in QWIN

Tom Nale
Tom Nale Member ✭✭
edited October 2018 in Investing (Windows)

Comments

  • NotACPA
    NotACPA Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited October 2018
    Record the $29.44/sh of RAI as an RAI dividend.  Then record a Corporate Acquisition of RAI by BTI as .526 shares

    Q user since February, 1990. DOS Version 4
    Now running Quicken Windows Subscription, Business & Personal
    Retired "Certified Information Systems Auditor" & Bank Audit VP

  • Tom Young
    Tom Young Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited May 2018
    For taxes this is a sale of RAI to BTI for cash plus stock so first record a Sold action, for cash, in the amount of ($29.44 + .526 x $69.25*) x # of shares of RAI tendered.  Then on the same day record a Buy of (.526 x # if shares of RAI tendered) shares of BTI at a price of $69.25* per share.

    If you end up with fractional shares of BTI you will subsequently sell that fraction for the amount of cash in lieu reported by your broker.

    * figure recommended by BTI at http://s2.q4cdn.com/129460998/files/doc_downloads/FINAL-RAI-ACQUISITION-INVESTOR-FAQ.pdf  You can come up with another, supportable, number if you wish.
  • q_lurker
    q_lurker Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited July 2017
    Tom Young said:

    For taxes this is a sale of RAI to BTI for cash plus stock so first record a Sold action, for cash, in the amount of ($29.44 + .526 x $69.25*) x # of shares of RAI tendered.  Then on the same day record a Buy of (.526 x # if shares of RAI tendered) shares of BTI at a price of $69.25* per share.

    If you end up with fractional shares of BTI you will subsequently sell that fraction for the amount of cash in lieu reported by your broker.

    * figure recommended by BTI at http://s2.q4cdn.com/129460998/files/doc_downloads/FINAL-RAI-ACQUISITION-INVESTOR-FAQ.pdf  You can come up with another, supportable, number if you wish.

    Expanding on Tom Young's answer, one of the FAQs in his link was
    8) What is the tax treatment for the cash and shares I receive?


    The transaction is considered a taxable event for RAI shareholders for U.S. tax purposes.
    That is the consideration that makes this transactions a sale of the RAI shares (with consequent capital gain considerations) and a new purchase of the BAT ADS shares (ticker BTI) thereby starting a new holding (new cost basis, new acquisition date).    
  • Russ Donovan
    Russ Donovan Member ✭✭✭
    edited July 2017
    Tom Young said:

    For taxes this is a sale of RAI to BTI for cash plus stock so first record a Sold action, for cash, in the amount of ($29.44 + .526 x $69.25*) x # of shares of RAI tendered.  Then on the same day record a Buy of (.526 x # if shares of RAI tendered) shares of BTI at a price of $69.25* per share.

    If you end up with fractional shares of BTI you will subsequently sell that fraction for the amount of cash in lieu reported by your broker.

    * figure recommended by BTI at http://s2.q4cdn.com/129460998/files/doc_downloads/FINAL-RAI-ACQUISITION-INVESTOR-FAQ.pdf  You can come up with another, supportable, number if you wish.

    Do I then add a $20 MiscExp for the ReorgFee? Against RAI or BTI or "no security?
  • q_lurker
    q_lurker Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited July 2017
    Tom Young said:

    For taxes this is a sale of RAI to BTI for cash plus stock so first record a Sold action, for cash, in the amount of ($29.44 + .526 x $69.25*) x # of shares of RAI tendered.  Then on the same day record a Buy of (.526 x # if shares of RAI tendered) shares of BTI at a price of $69.25* per share.

    If you end up with fractional shares of BTI you will subsequently sell that fraction for the amount of cash in lieu reported by your broker.

    * figure recommended by BTI at http://s2.q4cdn.com/129460998/files/doc_downloads/FINAL-RAI-ACQUISITION-INVESTOR-FAQ.pdf  You can come up with another, supportable, number if you wish.

    @Russ Donovan:  
    a)  Talk to your tax adviser ('cuz I ain't one)
    b)  I'd probably apply it against the BTI security, but I suspect it might be a direct investment expense, rather than a cost basis adjustment, such that what security you apply it to would not matter.  See a).  
  • Tom Nale
    Tom Nale Member ✭✭
    edited July 2017
    I put down the $29.44 as a dividend and entered the conversion as a corporate acquisition at the rate of .526 to 1 and it came out with the same numbers that Etrade is showing on my account.  Etrade initially charged $38 for the transaction and has since entered a credit for that amount.
    Thanks for taking the time to answer this question!
  • Unknown
    Unknown Member
    edited June 2018
    The $29.44 is not a dividend but is part of the sale price.  For tax purposes this may be important.
  • q_lurker
    q_lurker Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited July 2017
    Allen said:

    The $29.44 is not a dividend but is part of the sale price.  For tax purposes this may be important.

    and point 2 for that being the wrong approach ... 

    The Corporate Acquisition route is going to convert your RAI basis to be the new basis for the BTI shares.  Wrong.  The BTI basis should be the $69.25/share identified in Tom Young's post (or a similar justifiable value).  That applies whether eTrade shows it that way immediately or not.  (Brokerages have been known to take the quick approach first and then later silently make corrections.)

    All depends on whether the Quicken user wants a tax-accurate financial picture.  Some do.  Some don't care.  
  • Tom Nale
    Tom Nale Member ✭✭
    edited July 2017
    Allen said:

    The $29.44 is not a dividend but is part of the sale price.  For tax purposes this may be important.

    and my account is an IRA so I do not care about tax accuracy. 
  • Unknown
    Unknown Member
    edited August 2017
    Allen said:

    The $29.44 is not a dividend but is part of the sale price.  For tax purposes this may be important.

    The cash is return of capital to RAI shareholders. It is not taxable.
  • Tom Young
    Tom Young Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited August 2017
    Allen said:

    The $29.44 is not a dividend but is part of the sale price.  For tax purposes this may be important.

    The company disagrees with you

    http://s2.q4cdn.com/129460998/files/doc_downloads/FINAL-RAI-ACQUISITION-INVESTOR-FAQ.pdf

    unless what you are saying is that "the cash can be counted as a return of capital against the basis of RAI, then report the the sale of the (lower basis) RAI for the cash value of the BTI received, then use that cash to buy BTI." 
  • Unknown
    Unknown Member
    edited August 2017
    Allen said:

    The $29.44 is not a dividend but is part of the sale price.  For tax purposes this may be important.

    Yes, the cash portion is a taxable event for RAI holders. I am not sure as to how much of the cash distribution is taxable.
  • Unknown
    Unknown Member
    edited August 2017
    Allen said:

    The $29.44 is not a dividend but is part of the sale price.  For tax purposes this may be important.

    According to Vanguard, the entire value (BTI Stock + Cash - Original Basis) is taxable as Cap Gain.
  • q_lurker
    q_lurker Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited August 2017
    Allen said:

    The $29.44 is not a dividend but is part of the sale price.  For tax purposes this may be important.

    @martin.peter.b. The tax consequence is the capital gains associated with the effective sale of the RAI shares. You "sold" the RAI shares for $69.87 per share using above values and had some basis in those shares. That gain, if any, is taxable at applicable capital gain rates. That taxable amount may be more or less than the $29.44 per share.
  • Tom Young
    Tom Young Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited August 2017
    Allen said:

    The $29.44 is not a dividend but is part of the sale price.  For tax purposes this may be important.

    @Chas Modee

    The entire value of what what received - cash plus stock - is not capital gains, it's the PROCEEDS of a sale.  When you subtract your basis in RAI THEN you have capital gains, or loss.
  • Unknown
    Unknown Member
    edited March 2018
    Allen said:

    The $29.44 is not a dividend but is part of the sale price.  For tax purposes this may be important.

    the stock portion of RAI was exchanged for stock of BTI. there was no realization of value for that part of the transaction, "no cash in hand". Tax should only be paid on that portion where value was realized, "cash in hand". If the stock for stock portion is considered taxable, that means the owner of RAI was forced to involuntarily purchase BTI stock which is still exposed to the risk of the market!
  • q_lurker
    q_lurker Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited March 2018
    Allen said:

    The $29.44 is not a dividend but is part of the sale price.  For tax purposes this may be important.

    @Betty Leach:  as pointed out to others, the companies disagree with you.  They cite this a a taxable transaction.  It does not matter if some of the value received was in another company's stock.  
    If the stock for stock portion is considered taxable, that means the owner of RAI was forced to involuntarily purchase BTI stock which is still exposed to the risk of the market!
    Yep.  That is pretty much what happens in takeovers.  Of course they also have the ability to sell it off immediately at no (practical) gain/loss or risk.

    As always, no one here is claiming to offer tax advice or consultation.  Do your own due diligence and consult qualified, competent advisers.  
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