How does Quicken handle a corporate acquisition paid with a combination of cash and stock?

Philip Litwinoff

On May 8, 2020, Abbvie acquired Allergan for a combination of $120.30 per share PLUS 0.866 shares of Abbvie for each share of Allergan. Quicken does not seem to have a method for recording this transaction.

q_lurker

Be careful.  

The tax information for this event can be found here:  https://investors.abbvie.com/tax-information

From that source (with emphasis added)

The U.S. federal income tax treatment of the receipt of the Acquisition Consideration in the Transaction by a Shareholder should generally be treated as a taxable exchange for U.S. federal tax purposes, resulting in gain or loss. 

Generally means there are exceptions so proceed cautiously.  

For those Shareholders for whom the Transaction is a taxable exchange, regardless of whether Section 304 of the Code applies to the Transaction, their tax basis in the AbbVie shares received should be equal to the fair market value of those shares on May 8, 2020. Such Shareholders will generally recognize capital gain or loss equal to the difference, if any, between: (i) the sum of the cash, including any cash received in lieu of fractional shares of AbbVie common stock, and the fair market value of any AbbVie common stock received in the Transaction, and (ii) their adjusted tax basis in Allergan shares.

In Quicken (and for your tax filings?), I believe you will need to treat this as if you sold the Allergan shares.  In exchange for each share you received $120.30 cash and 0.866 shares of ABBV.  The source information suggests a fair market value of those ABBV shares of $84.22/share (closing value on 5/7/20).  Using those figures, you received $120.30 + $72.93 = $193.23 of value for each Allergan share you 'sold'.  You and or your broker may use a different value for the ABBV shares if you choose to.  

I believe you sell all Allergan shares at that rate and buy the ABBV shares received including any fractional shares due (0.866 * number of Allergan shares) at the $84.22/share rate.  That should leave the $120.30 per Allergan share cash value in your account.  

Your final step would be to sell the fractional share for the cash-in-lieu amount you received.

If in doubt, consult your tax or investment advisors.  I am not one, nor do I play one on television or in the movies.  

Philip Litwinoff

Thank you for the extra research you did on this transaction. I agree wholeheartedly with you advice (which is what I had suggested to another responder). It just seemed that since this is a taxable transaction, the history of the Allergan basis does not need to carried forward into the new company. I just could not see where Quicken helped you dissect the transactions into the mechanical bookkeeping side.

NotACPA

What Q product are you running and what BUILD of that product?  Do HELP, About Quicken for this info.

splasher

Yes it does.  Use the "Corporate Acquisition (stock for stock)" transaction to take care of the stock trade part and a separate transaction to cover the cash per share income.

Philip Litwinoff

> @NotACPA said:
> What Q product are you running and what BUILD of that product?  Do HELP, About Quicken for this info.

Quicken 2020; Version R26.21; Build 27.1.26.21

Philip Litwinoff

> @splasher said:
> Yes it does.  Use the "Corporate Acquisition (stock for stock)" transaction to take care of the stock trade part and a separate transaction to cover the cash per share income.

If I do your suggestion, the stock does work out, but there are no shares left to apply the cash against.

What about first "selling" the Allergan stock for the cash price paid by Abbvie, and then "Add - Shares Added" to put the new Abbvie shares into the portfolio? I think that works.

NotACPA

What's your specific Q product?  Deluxe? Premier?  Home & Business?

And do a "Corporate Securities Spin-off" to receive the Abbvie and then
Sell the Allergan.

If you received "Cash in Lieu" for any fractional shares of Abbvie, then sell those fractions.

splasher

Philip Litwinoff said:

> @splasher said:
> Yes it does.  Use the "Corporate Acquisition (stock for stock)" transaction to take care of the stock trade part and a separate transaction to cover the cash per share income.

If I do your suggestion, the stock does work out, but there are no shares left to apply the cash against.

What about first "selling" the Allergan stock for the cash price paid by Abbvie, and then "Add - Shares Added" to put the new Abbvie shares into the portfolio? I think that works.

The cash part is done with your calculator, but you should be able to get that amount from the brokerage.  It is not something that Quicken will calculate for you. 

You don't want to do a sell and add since you will lose all the history of the lots of the original Allergan purchases. 

In the "Corp Acq" process, Q removes all of the Allergan in a single remove and add back in a transaction for Abbvie for each of the Allergan lots.

q_lurker

Be careful.  

The tax information for this event can be found here:  https://investors.abbvie.com/tax-information

From that source (with emphasis added)

The U.S. federal income tax treatment of the receipt of the Acquisition Consideration in the Transaction by a Shareholder should generally be treated as a taxable exchange for U.S. federal tax purposes, resulting in gain or loss. 

Generally means there are exceptions so proceed cautiously.  

For those Shareholders for whom the Transaction is a taxable exchange, regardless of whether Section 304 of the Code applies to the Transaction, their tax basis in the AbbVie shares received should be equal to the fair market value of those shares on May 8, 2020. Such Shareholders will generally recognize capital gain or loss equal to the difference, if any, between: (i) the sum of the cash, including any cash received in lieu of fractional shares of AbbVie common stock, and the fair market value of any AbbVie common stock received in the Transaction, and (ii) their adjusted tax basis in Allergan shares.

In Quicken (and for your tax filings?), I believe you will need to treat this as if you sold the Allergan shares.  In exchange for each share you received $120.30 cash and 0.866 shares of ABBV.  The source information suggests a fair market value of those ABBV shares of $84.22/share (closing value on 5/7/20).  Using those figures, you received $120.30 + $72.93 = $193.23 of value for each Allergan share you 'sold'.  You and or your broker may use a different value for the ABBV shares if you choose to.  

I believe you sell all Allergan shares at that rate and buy the ABBV shares received including any fractional shares due (0.866 * number of Allergan shares) at the $84.22/share rate.  That should leave the $120.30 per Allergan share cash value in your account.  

Your final step would be to sell the fractional share for the cash-in-lieu amount you received.

If in doubt, consult your tax or investment advisors.  I am not one, nor do I play one on television or in the movies.  

Philip Litwinoff

Thank you for the extra research you did on this transaction. I agree wholeheartedly with you advice (which is what I had suggested to another responder). It just seemed that since this is a taxable transaction, the history of the Allergan basis does not need to carried forward into the new company. I just could not see where Quicken helped you dissect the transactions into the mechanical bookkeeping side.

splasher

I just knew I should have stayed away from this one and leave it for @q_lurker but I thought I had learned enough from him to answer.  Boy, was I wrong.  Next time I'll keep my fingers off my keyboard.