Recording and Accounting for the Time Warner / AT&T Cash and Stockl Merger
I'm sure this is on the mind or all Time Warner and Quicken users. HOW do we record and account for the cash and stock merger of AT&T and Time Warner. The program does not even have an option for this type of transaction (2017 Premier R15.15 Build: 26.1.15.15). None of the few cash and stock mergers I found online or in community CLEARLY explain how to process similar transactions.
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http://about.att.com/story/att_comple...
I would wait until they issue the 8937 before entering the info into Quicken.
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https://getsatisfaction.com/quickencommunity/topics/how-do-i-record-the-analog-devices-inc-cash-and-...
So my process comes down to handling each lot separately based on the your current cost basis for that lot.
So far with little research on my part, all I have found has been the following statement. I have not sought out the prospectus information for this deal. I usually like to see the Form 8937 that gets filed before committing too much to the web. At such time as I see more specifics and have time myself. I'll put together something similar for this transaction.
(Caveat 1: I am not a TW or AT&T shareholder at this time, so I have no direct interest in this deal.)
(Caveat 2: I am not a tax pro, CPA, broker, financial professional, or otherwise qualified to give advice on such matters. I am a nameless, faceless person with a PC and an internet connection. Do your own die diligence and consult qualified professionals and persons you know to be knowledgeable.)
To further complicate matters, company management frequently doesn't give clear or complete guidance, or gives conditional guidance that depends on how the IRS views certain transactions that occurred in the deal's execution.
I'm connected to RJ Investments. The proceeds from the (Category) Sale/Redemption, (Activitiy Type) Merger of TIME WARNER INCORPORATED NEW (TWXOLDDD) did not post to my Investment Cash Account in Quicken. So, in order to have the Investment Cash Account in Quicken reconcile with what RJ Investments is reporting, I created a manual deposit into the Quicken Account. This is not an ideal solution, I'd have much rather had the transaction posted during One Step Update. Is it even feasible to ask to have this fixed?
It is usually best to work these things out on paper or spreadsheet before getting into the Quicken side of things. That exercise should give the user the ballpark to recognize if the brokerage is close.
Personally, I would delete any associated transactions from the broker unless I had proven them to be accurate and acceptable to my needs.
https://getsatisfaction.com/quickencommunity/topics/how-do-i-record-the-analog-devices-inc-cash-and-...
So my process comes down to handling each lot separately based on the your current cost basis for that lot.
So far with little research on my part, all I have found has been the following statement. I have not sought out the prospectus information for this deal. I usually like to see the Form 8937 that gets filed before committing too much to the web. At such time as I see more specifics and have time myself. I'll put together something similar for this transaction.
(Caveat 1: I am not a TW or AT&T shareholder at this time, so I have no direct interest in this deal.)
(Caveat 2: I am not a tax pro, CPA, broker, financial professional, or otherwise qualified to give advice on such matters. I am a nameless, faceless person with a PC and an internet connection. Do your own die diligence and consult qualified professionals and persons you know to be knowledgeable.) I was just thinking it would be helpful to compile a list of merger posts.
Questions? Check out the Quicken Windows FAQ list
https://getsatisfaction.com/quickencommunity/topics/how-do-i-record-the-analog-devices-inc-cash-and-...
So my process comes down to handling each lot separately based on the your current cost basis for that lot.
So far with little research on my part, all I have found has been the following statement. I have not sought out the prospectus information for this deal. I usually like to see the Form 8937 that gets filed before committing too much to the web. At such time as I see more specifics and have time myself. I'll put together something similar for this transaction.
(Caveat 1: I am not a TW or AT&T shareholder at this time, so I have no direct interest in this deal.)
(Caveat 2: I am not a tax pro, CPA, broker, financial professional, or otherwise qualified to give advice on such matters. I am a nameless, faceless person with a PC and an internet connection. Do your own die diligence and consult qualified professionals and persons you know to be knowledgeable.) Could be doable - with respect to these cash-to-boot type of mergers. I'll take that under advisement. No promises.
You may recall on the QLC site where we could create our own tags (aka categories) for posts, we had a tag for stock mergers. There were aspects then soooo much better than get-sat.
I will hold off with my opinion on those two price points until I see more definitive info from AT&T, i. e., their IRS Form 8937 for the deal.
In my portfolio the TWX shares are all long term so it is simple. Remember to allocate the cost basis along short/long term lines.
I used the following steps.
1) Remove the original shares at the date they were purchased using the same cost they were purchased with. This should show a zero capital gains.
2) For the cash portion, Add the original number of shares at the cost basis shown by your brokerage house, using the date of the last lot.
3) Sell these shares as of June 15, 2018. In Q2018, the Tax Schedule should show the capital gains of the cash portion. It should match that of the brokerage house.
4) Compute the number of new AT&T shares by multiplying the number of TWX shares by share ratio of 1.437. You will have a whole number of shares and a fractional number of shares.
5) Take the cost basis of the TWX shares before the merger and subtract the cost basis of the cash portion to obtain the new cost basis for the AT&T shares. Some of the cost basis will be allocated to the fractional shares and the remainder to the whole shares. The capital gain report from your brokerage house will show the allocations.
6) Add the fractional shares using the cost basis allocated by the brokerage house, using the date of the last lot.
7) Sell the fractional shares as of June 15, 2018 or as of the date shown by the brokerage house. The price should be about $32.26/shares. This value depends upon when your brokerage house actually sold the fractional shares. In Q2018, the Tax Schedule should show the capital gains of the cash-in-lieu portion. It should match that of the brokerage house.
8) Take the cost basis of the AT&T shares compute in step 5 and subtract the cost basis of the cash-in-lieu portion. This will the cost basis of the whole shares.
9) Add the number of new AT&T whole shares using the cost basis computed in step 8. This should match your brokerage house values. Use the date that the TWX shares were obtained.
Over the pass several decades I have used Move Share In/Out with older versions of Quicken and now Add/Remove shares with Q2018. It's the only way to get Quicken to match the brokerage house.
In short, try to match what the brokerage house does.
Trust but verify!
However it's clear that more recently at least some brokers are reporting these transactions "correctly" on the 1099-B, in a summary fashion, meaning that the user can simply enter the proceeds and cost basis reported on the 1099-B directly onto Form 8949. It don't know what the impetus is for this change - it might be that brokers are simply tired of answering questions from their customers along the lines of "how do I enter this in my income tax return?" - and it's not clear that all brokers are doing this.
As many - probably most - cash plus stock deals do require a lot-by-lot calculation of gain and the resulting basis in the stock received, if you want to keep the detail of your lots' basis properly stated you are forced to do the lot-level calculations on your own unless that detail is available from the broker too.
Could you give a little more detail on steps 1, 2 and 3? I know I'm missing something because it seems like step 2 is just reversing step 1. I know that I need to come up with a capital gain that is value of the new AT&T stock on 6/15/18 plus the cash received less my original TWX basis. Is the amount that I sell it for equal to the value of the new AT&T stock on 6/15/18 plus the cash received?
The steps after that all make sense to me.
John Prewitt's method sounds similar to the method I use in these stock plus cash acquisitions that require a lot-by-lot calculation, that specify no losses may be recognized, and limit any gain to the lesser of cash received or the gain you obtain when you simply treat the stock plus cash received as "proceeds" minus your basis in the stock tendered.
First and foremost though, if you have multiple lots you must make your calculations outside of Quicken. There's no "shortcut" that avoids that if you want accuracy. So you list out, presumably in a spreadsheet, each lot:
- its date acquired, (it's best to list them in chronological order, oldest first)
- its basis,
- how much cash was received for the lot,
- how many "new" shares were received for those shares,
- the total "proceeds" received for that lot which is (number of shares received x per share fair market value) + cash, and
- the gain for each lot which is the lesser of cash receive or the gain based on "proceeds" minus basis.
If you have a loss for a particular lot you enter $0 in its "gain" column.On the same line for each listed lot you can also calculate your basis in "new" shares received which is: old basis - cash received + gain recognized for that lot, (obviously 0 for loss lots.)
Now summarize your gains, if any, into short term and long term gains. Using only the cash received for your short term holdings, derive a basis to use against that cash to come to the short term gain you've determined. Likewise, using only the cash received for your long term holdings, derive a basis to use against that cash to come to the long term gain you've determined.
If you've done all this then you're ready to make your entries into Quicken so:
- Make one entry to Remove all old shares
- Make one entry to Add back your old short term shares using any date that makes the new "lot" short term and using a per share cost that comes to the derived basis determined above.
- Make one entry to Add back your old long term shares using any date
- Sell your short term and long term holdings for the cash you received for each "lot'.
At this point your cash (before cash in lieu) is properly stated in Quicken and your long term and short term gains are properly stated.that makes the new "lot" long term and using a per share cost that
comes to the derived basis determined above.
Now do a series of Add actions to establish each lot of "new" shares using an appropriate "acquired" date (same as date of lot tendered) and an appropriate per share cost to come to the basis you calculated for each lot.
Then you sell whatever fractional shares you "should have" received for the cash in lieu, recognizing a gain or loss as appropriate.
If you have a lot of shares then it's a fair amount of work, though using the power of Excel you can pretty much reduce the Excel "entry" effort to listing out the date of acquisition, number of shares and per share cost of each of your "old" shares.
Thanks for that. I should have realized that that purchase price would just be a plug to get the gain. Fortunately for me there is just one lot and its long term. I've already calculated the gain and new basis so the entries should be simple.
https://investors.att.com/stockholder-services/timewarner-stockholders
For their view, they established a fair market value for the AT&T shares distributed to the TWX shareholders at $32.54/share. Considering the 1.437 shares and the $53.75 in cash, that means each TWX shareholder received $100.51 for each TWX share (53.75 cash + 46.76 in AT&T stock).
From that data, I apply the following presented in spreadsheet form:
The process in Quicken (my approach) becomes
For Each TWX lot ---
1) Sell Shares of TWX
2) Buy Shares of AT&T
3) Remove Shares of AT&T (just bought because the acquisition date is wrong)
4) Add Shares of AT&T (with the correct acquisition date)
When all lots done
5) Sell fractional share of AT&T cor cash-in-lieu amount received. Per the cited documents, that may be at 32.80/share or it could be at some other rate.
1) Return of Capital for Real Cash received
2) Remove Shares of TWX
3) Add Shares of AT&T
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The lot 3 (no gain) circumstances tend to be more rare as this means the original shareholders are taking a loss on the deal, and the deal may not be overly attractive to the big-wigs making the decisions.
Although q.lurker's method works just fine to get you to the correct answer I've always used a different method that typically results in fewer entries and, to my way of thinking, somehow is more in line with how people think about these kinds of transactions. That's almost certainly because I came at this over in the TurboTax forum where the question almost always is "how do I record this in my income taxes?"
So my spreadsheet picture for the above looks like this:
So this comes down to a Remove of all the stock, an Add of all the stock at a derived basis and then a Sold for the cash received, followed by 3 Adds for the new lots. The Proceeds and Basis number get entered directly into the income tax return (assuming that's what the 1099-B is reporting as basis.)