How do I record the merger of TDOC and LVGO in Quicken for Windows

tramakrishnan
tramakrishnan Member ✭✭
edited November 2020 in Investing (Windows)
LVGO shareholders received 0.592 shares of TDOC for each share of LVGO and $4.24 cash for each share of LVGO. In addition, LVGO share holders received $7.09 as special dividend for each share of LVGO. I would appreciate if someone in the community would help me with recording this ransaction in Quicken for Windows. Thanks.

Answers

  • Mark1104
    Mark1104 Member ✭✭✭✭
    edited November 2020
    1) record the cash dividends first 
    2) then there is a transaction type called "corporate acquisition (stock for stock)" to record the stock transfer - should be fairly easy when you review that screen, 
  • Tom Young
    Tom Young Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited December 2020
    Unfortunately, (particularly if you have many lots), this is a typical "cash + stock" transaction whereby you need to do some calculations outside of Quicken in order how to make your entries.  @Mark Steinman's approach just isn't correct here; the $4.24 isn't a dividend it's part of the proceeds of a sale.  The blow by blow of what you need to do outside of Quicken is:

    1. For EACH LOT of your stock that you gave up you need to determine gain or loss based on the "proceeds" of the sale (cash per share of  $4.24 + FMV of stock received (including the fraction) of $217.89) vs. your basis in that lot. The holding period carries over to the new lot.
    2. Losses are not recognized in your tax return.  The capital gain/loss in this instance is reported as $0.
    3. Gains ARE recognized but only up to the LESSER of cash received or the gain as calculated per 1 above.
    4. For each lot your basis in the stock of the acquiring company - before addressing the Cash in Lieu issue - is: Basis in lot of acquired company tendered - cash received + gain recognized.
    5. You then attribute, proportionally, basis from each lot of the acquired company to the fractional share and and RECOGNIZE gain or loss on the CIL transaction.
    I'd urge you to read the Form 8937 issued in connection with the merger at
    which explains this tax treatment, talks about the special dividend associated with the transaction (which is excluded from the merger itself), and recommends the $217.89 "fair market value" figure.
    If you have only one lot of LVGO the above exercise isn't particularly difficult but if you have multiple lots then this exercise is all best done in a purpose-built spreadsheet.

    Assuming you have only one lot of LVGO then the Quicken entries would be along the lines of:
    1. Do a "Remove" action for LVGO
    2. Do an "Add" action for LVGO entering the correct date acquired in the Add window's "Date acquired" box and using a derived basis you've calculated such that the subsequent sale of LVGO (Step 3.) results in the proper gain.  A loss situation means the basis = proceeds.
    3. Sell your LVGO for the cash you received for that lot.  At this point the cash in the Account associated with the merger should be properly stated and your gain, if you have one, or loss ($0) should be properly stated.
    4. Do an "Add" action for your TDOC shares, (which includes the fraction), using the appropriate acquired date, (same as date of shares tendered), at a basis dictated by 4. above.
    5. Sell the fractional share for the CIL received, at a gain or loss.
    If you have many lots of LVGO you can aggregate these lots in step 2. for long term and short term holdings, but you'll have to make as many "Add" actions per step 4. as the number of lots tendered.

    ADDED:  The accounting for the sale is consistent with what you will report on your income tax return.  If the 1099-B lists only the cash received for the lot as the proceeds of the sale, you can use the same basis you used in Quicken.  If the 1099-B reports proceeds that's the combination of cash + FMV of stock received, (it seems to depend on the broker as to how proceeds are reported), simply change the basis used in the income tax return to come back to the same gain or loss ($0).
  • cander2776
    cander2776 Quicken Mac Other Member
    My holdings are in a 401K. Still, I appreciate the detail on how to account for everything.
  • 13Bravo
    13Bravo Quicken Windows Subscription Member ✭✭
    Hi Tom, just came across your guidance and really appreciate it. Much to my embarrassment though I am still lost. If you could help further, I'd appreciate it.

    So, like cander, I have my LVGO shares in a Roth so no tax concerns, this is strictly about properly recording in quicken. Before I get to the steps to record, hoping you can help on the "derived basis." I do have multiple lots but to keep this simple I will run through this for 1 share:

    5/29 purchase of 1 LVGO share at $58.48. You say above that the basis, prior to CIL is "Basis in lot of acquired company tendered - cash received + gain recognized"

    So to calculate the basis here you would take the FMV of the 1 share which would be 128.99 (1*0.592*217.89) less the cash received , 4.84, plus the gain of 74.75 (cash + FMV - original basis or 4.84 + 128.99 - 54.84), summary:

    128.99 - 4.84 + 74.75 or 198.90...is that right? My derived basis for 1 share at 54.84 would be 198.90?

    I think I am doing this wrong, thanks in advance for any help you might offer!
  • tramakrishnan
    tramakrishnan Member ✭✭
    Both Tom Young's directions and q_lurker's step by step directions helped me successfully document the merger of TDOC and LVGO in Quicken. I am giving the link of q_lurker from a few years ago where he/she explains a similar stock & cash merger of two different companies which can be used as a template for the current merger. I hope the link helps.

    https://community.quicken.com/discussion/7227627/how-to-record-cash-shares-received-in-stock-merger-of-cnvr-to-ads
  • Tom Young
    Tom Young Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited December 2020
    For that one share of LVGO you have proceeds of $4.24 + (.592 x $128.99) for a total of $133.23.  That gives you an economic gain of $74.75 but you recognize the lesser of the economic gain or the cash received of $4.24, so $4.24 is your reported gain.
    That sets your basis in the fraction of a share of TDOC at $58.48 - $4.24 + $4.24 = $58.48.
    I see that I haven't been perfectly clear in my above description, and I've edited it accordingly.  The only place I used the term "derived basis" was in reference to the Add actions associated with re-establishing your LVGO shares at the correct bases for the subsequent sale.  In your example the Add for the one share of LVGO would use a basis of $0 because you received $4.24 as cash proceeds and $4.24 - $0 = $4.24.

  • 13Bravo
    13Bravo Quicken Windows Subscription Member ✭✭
    @"Tom Young" @tramakrishnan ...sincerest apologies once again, a serious family medical issues has taken me out of pocket and am only getting around to sending this note to express my deep appreciation! With your help I've squared this away...I don't think it would have been possible without your insights, thank you again!!

    Be safe and all the best to you and your families in 2021!!

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