How does Quicken record a cash/stock merger? ZNGA TTWO

wchen91320
wchen91320 Member
edited July 2022 in Investing (Windows)
I bought Zynga for 2000 shares for back in $9.305/share, then I bought again on 11/22/21 for 4000 shares at $6.55/shares. Zynga got bought out by TTWO and now I have 243 shares of TTWO at $122.08/share and $21,072.63 of cash. How do you record these in Quicken?

Best Answers

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Answer ✓
    A couple of follow up points -- 
    I didn't go though the whole process with Quicken, but I believe what I laid out is accurate (based on the identified assumption).  Nevertheless, check you work and mine and make sure you understand what is taking place.  

    Though I laid out two separate sales for the two lots, you are really selling all shares for a total price.  I think that can be accomplished in one sale for one total that yields the total necessary current capital gains.  Whichever way makes sense to you.

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Answer ✓
    Just found out the fair market average is actually $127.11934 for each TTWO share received. 
    What is your source for that information, because it appears to be unusually high based on the trading information I have seen?

    Nevertheless, if that is the number you want, plug it in replacing the 118.37 I used above and follow through the numbers I showed in my spreadsheet screen snip from my post on May 27. 

Answers

  • wchen91320
    wchen91320 Member
    correction, 2000 shares back in 11/21/20 for $9.305/share. Please Help!
  • Bob_L
    Bob_L SuperUser ✭✭✭✭✭
    edited May 2022
    You should have the 2 bought transactions recorded in quicken and then enter a "corporate acquisition" action for the date it occurred.  (Use the Enter Transaction button in the investment register to select that corporate acquisition action.)

    In addition to the stock for stock, it looks like there was 3.50 per share in cash which you will also need to show as a sale of your Zynga shares. Confess I'm not sure how you do that though, maybe someone else can explain?
    Quicken Premier Subscription, Windows 11 Home
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    There is no canned solution for a cash+stock merger.  Your case needs two separate treatments - one for each lot - because of the price you paid for each lot.

    Overall:
    Step one is to determine the pair market value of the shares received  That is a user/investor choice though it is often good to follow the lead of your brokerage or the two companies.  Looking at the prices of TTWO on 5/20 (day following the announcement of the close), I see prices on Yahoo Finance as
    Open 120.89
    Hi 121.82
    Lo 114.92
    Close 116.12
    Looking at the average of the Hi/Lo (one of several possibilities) suggests a fair market average of $118.370 for each TTWO share received.  Since you received 0.0406 shares of TTWO for each ZNGA share held, that means you received for each share of ZNGA held $4.806 in shares of TTWO. 

    Step two -- Add in the cash received.  In addition you received $3.50 in cash for each ZNGA share bringing your total total value received to $8.306.  

    That is still based on MY ASSUMED $118.370 for the value of the TTWO shares.  YMMV!

    Step three -- compare those two values (4.806 and 8.306) to the price you paid for your ZNGA shares.
    You paid $9.305/share for the first 2000 share lot -- above the 8.306 level.  You paid $6.55/share for the second 4000 share lot -- between the two noted values. 

    For the older (more expensive) lot, you do not have any gains at this stage, thus the cash received is not subject to capital gains.  For the newer (cheaper) lot, part of the $3.50 cash is treated as current year capital gains.  The breakdown is summarized in the following snip from a spreadsheet.



    At the bottom of the screenshot are the transactions I would be using in Quicken.   Again, the values are based on the assumed FMV of TTWO immediately following the merger ($118.37/share).  A different assumption leads to different specific values.

    #3 - I assumed the 0.6 shares sold were 0.2 shares from the older lot and 0.4 shares from the newer lot.
    #4 steps are to correct the acquisition dates from the 'Buys' used in step 2.

    Hope this helps

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Answer ✓
    A couple of follow up points -- 
    I didn't go though the whole process with Quicken, but I believe what I laid out is accurate (based on the identified assumption).  Nevertheless, check you work and mine and make sure you understand what is taking place.  

    Though I laid out two separate sales for the two lots, you are really selling all shares for a total price.  I think that can be accomplished in one sale for one total that yields the total necessary current capital gains.  Whichever way makes sense to you.

  • wchen91320
    wchen91320 Member
    :) wow, very complicated. thank you so much for spending this much time on this. I need to read through again to understand better.
  • Paul Guagliardo
    Paul Guagliardo Member ✭✭
    May I jump in and ask a question? I believe my situation is easier but still don't know how to handle the cash and the fraction of shares. I am using "Corporate acquisition (stock for stock)."

    On 5/23/22. I owned 300 shares of ZNGA. According to eTrade, on 5/24/2022, I received 12 shares of TTWO (300 X .0406/per share of TTWO) plus $1,050 in cash (300 X $3.50). Since 300 X .0406 = 12.18, on 5/27/2022, I received $21.41 for the .18 fractional share @ $118.94615.

    My first question is 1.) (a) Should i put 0.0406 in the "New Shares issued per held share space? That would give me a total of 12.18 shares of TTwo.

    (b)How do I remove the .18 fractional share for which I received $21.41 on 5/27/2022? How is that cash treated?

    2.) Based on the price of $118.94615 for the value of my fractional share (0.18 of TTWO) , is $118.94615 the "Price per share for acquiring company...(after completion of acquisition)"?

    3.) How do I reflect the $1,050 in cash I recieved (300 X $3.50)? I assume some sort of separate transaction. Just a cash deposit?

    Hope I included all of the relevant information. Thanks in advance for any suggestions.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    My first question is 1.) (a) Should i put 0.0406 in the "New Shares issued per held share space? That would give me a total of 12.18 shares of TTwo.
    (b)How do I remove the .18 fractional share for which I received $21.41 on 5/27/2022? How is that cash treated?
    Use the 0.0406.  After you have completed the merger process, you will sell those 0.18 shares for the cash-in-lieu amount you received.  (Sell the 0.18 shares at the $118.94615/share = $21.41). 
    2.) Based on the price of $118.94615 for the value of my fractional share (0.18 of TTWO) , is $118.94615 the "Price per share for acquiring company...(after completion of acquisition)"?
    No, not necessarily, but it could be.  Ultimately, your choice.  Above in my example I used $118.37  so your value is in the same ballpark.  The real questions are a) do you want to match your brokerage info, and b) what value did they use?     
    3.) How do I reflect the $1,050 in cash I received (300 X $3.50)? I assume some sort of separate transaction. Just a cash deposit?
    What is your intent?  To be fully accurate, all, some, or none of that $1,050 may be taxable as capital gains income to you in 2022.  Do want Quicken to have an accurate representation of that potentially taxable income?  Do you want a value you can use to check the 1099 from the brokerage you receive next January?  If you want any accuracy, you need to follow the outline I provided above - Sell the 300 ZNGA shares for the right price that generates the right capital gains.  Buy the 12.18 TTWO shares for the right price that creates their basis value correctly.  Sell the 0.18 fractional shares of TTWO for the $21.41 (perhaps another small capital gain).  Remove the remaining TTWO shares and Add them back in to get their acquisition date correct.  

    If you want to share your cost basis and acquisition date(s) for the ZNGA shares, and possibly what your brokerage is showing for the resulting basis of the 12 TTWO shares, I could take a look at backfiguring their fair market value selection.

  • Megan Zuckerman
    Megan Zuckerman Member ✭✭
    edited June 2022
    Hi @q_lurker, I know you have done this twice already but I could really use some support. My goal is to know what transactions to enter in quicken to have this reflect gains / losses and accurate holdings.

    i bought 50 shares of zynga on 12/11/2020 for $8.7166 a share for a total cost basis of $435.83

    i received $175 (apparently the $3.5 * 50 shares)
    my 50 shares of zynga @.0406 return 2.03 shares of ttwo represented by:
    2 shares of ttwo @ ~(estimated)118.37 (how can i tell from my brokerage transactions attached what the FMV was)
    $3.63 cash in lieu of .03 (wow i think this is the only way i can tell what my brokerage thinks FMV is is that true? (3.63/.03 = $121)).

    So if I follow down your directed path,
    I received – and I don’t quite understand this terminology but that's ok - for each share of ZNGA held $4.9126 (.0406*$121) in shares of TTWO (assuming I got the FMV value right at $121 based on brokerage transactions attached).
    In addition I received 3.5 for each zynga share (3.5 * 50) = $175. This brings my total value received per share to $8.4126 ($4.9126+3.5).
    Comparing $8.4126 to the price I paid $8.7166, I should not have capital gains. Do I need to represent the losses somehow?

    Now this is where I sort of get lost. Digging into your spreadsheet, i don't understand what real cash received represents or the new shares and basis of new shares columns. i'm interested in learning but if it’s too deep and too much time to explain, I’d be happy to just hear what you think I should do with my quicken transactions to make it right 😊. I cant expect to understand everything 😊.

    Ps my goal is just to update my quicken and have it be relatively accurate to my gains and losses. And so that my shares reconcile out. As you can see from my quicken transactions downloaded from my brokerage account (attached), there is no actual removal of the 50 shares or addition of the 2 shares. So even my holdings aren’t accurate. Quicken and he brokerage don’t work that well together on these special situations.
  • wchen91320
    wchen91320 Member
    Just found out the fair market average is actually $127.11934 for each TTWO share received. Recap my situation, I bought Zynga for 2000 shares back in 11/21/20 for $9.305/share, then I bought again on 11/22/21 for 4000 shares at $6.55/shares. Zynga got bought out by TTWO and now I have 243 shares of TTWO at $127.11934/share (cost basis of $30,890) and $21,072.63 of cash. How do you record these in Quicken? Thanks again for your help.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Answer ✓
    Just found out the fair market average is actually $127.11934 for each TTWO share received. 
    What is your source for that information, because it appears to be unusually high based on the trading information I have seen?

    Nevertheless, if that is the number you want, plug it in replacing the 118.37 I used above and follow through the numbers I showed in my spreadsheet screen snip from my post on May 27. 
  • Megan Zuckerman
    Megan Zuckerman Member ✭✭
    hey @q_lurker. did you see my situation posted above on 6/1? any chance you can help with some guidance on how i should enter my quicken transactions?
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    @Megan Zuckerman
    I saw a question from you re this topic in an email notice I got, but I find no comments from you in this discussion.  No comments on June 1 nor June 6 (date of email).  Hope this gets to you and you can clarify.  Will check on your status in other directions.   
  • Megan Zuckerman
    Megan Zuckerman Member ✭✭
    Hi @q_lurker, yes there is something wrong with my community profile where my comments are displaying only for me when logged in. when i look at this discussion when no logged in i can not see my comments. likewise others cannot see my comments which is naturally super frustrating. I have a ticket open with support on this (Reference number 9521548) that they will hopefully fix soon. If you know of a way i can send my comment to you directly or something i am happy to try that or we can wait until they fix my profile / account so my comments will display. thanks for reaching out!
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    @Megan Zuckerman

    Your comments are visible to everyone now.
    QWin Premier subscription
  • Paul Guagliardo
    Paul Guagliardo Member ✭✭
    Q_Lurker: Thanks for your June 1 reply. This is in a Roth account so not worried about capital gains, taxes, etc. Just want to be as accurate as possible and mirror how the brokerage handles it. Thanks again.
  • Megan Zuckerman
    Megan Zuckerman Member ✭✭
    @Jim_Harman well thats a relief! thanks for letting me know. took me a while to figure out that they werent visible. i wonder what the fix was :-).
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    @q_lurker contacted a Moderator, who fixed it. It's not clear why you were in limbo.
    QWin Premier subscription
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    @Megan Zuckerman
    That 'muted' state you were lost in would seem to be quite unusual, the the extent that none of us superusers were aware such a state existed.  Rather than quote your whole June 1 post, I try to comment and respond to selected points and questions.

    $3.63 cash in lieu of .03 (wow i think this is the only way i can tell what my brokerage thinks FMV is is that true? (3.63/.03 = $121)).
    Actually, that is a number established by TTWO.  It is what they paid out as cash in lieu of the fractional shares they did not distribute.  Within a day or so of the acquisition, they determined the total of the fractional shares for which they would need to pay out as cash in lieu, sold that quantity in the open market, and paid out accordingly at that rate.  Therefore it is not really a very desirable measure of the fair market value immediately after the exchange.  It is unlikely that your brokerage used that value as FMV.

    Comparing $8.4126 to the price I paid $8.7166, I should not have capital gains. Do I need to represent the losses somehow? 
    I would contend your $121 is too high, thus your 8.4126 is too high, but the conclusion you reached that your cost of the ZNGA shares was above the upper value is valid.  So you are correct that you should not owe capital gains taxes on this transaction for your 2022 tax year.  That then leads to your first Quicken entry
    --- Sell the 50 shares of ZNGA for your original cost ($435.83 = $8.7166/share).  This $435.83 becomes cash in your account.

    Your next step is to 'buy' the 2.03 shares of TTWO for the correct cost.  That correct cost leaves the $3.50/ZNGA share as cash in your account.  Thus you are buying the 2.03 shares for $260.83 (435.83 - 175 = 260.83) or for $128.48769/share (let Quicken calculate that cost/share).  
    --- Buy 2.03 TTWO for 260.83.  Cash in the account (associated with this transaction is now $175.

    But your Quicken data now shows you acquired the TTWO shares on 5/23/22.  That is incorrect.  You get credit for owning them since 12/11/20 when you bought the 50 shares of ZNGA.  If that discrepancy is important to you, two more Quicken transactions
    --- Remove Shares 2.03 shares TTWO
    --- Add Shares 2.03 shares TTWO; cost 260.83; Date Acquired 12/11/20     

    Now sell the 0.03 fractional shares for the $3.63 cash-in-lieu received.  Your broker probably recorded that a couple of days after acquisition; you might want to choose the same date.  That 'sale' at a rate of $121/share for shares you owned at $128.49/share will produce in Quicken (and the real world) a capital loss of about $0.22.  That should be what your broker reports on 1099's to you next January, but it is also in the negligible range. 
    --- Sell 0.03 TTWO for 3.63,  Cash is now up to $178.63

    As it stands at this point, you now have the 2 shares of TTWO and $178.63 cash in the account.  The basis for the TTWO shares should be $256.97 (or .98 depending on rounding).  That should be what your brokerage is showing, but no promises on that yet.  The brokerages can be slowing getting the details worked out.

    Quicken and he brokerage don’t work that well together on these special situations.
    In these situation, no brokerage works well with Quicken.  While these 'cash-to-boot' transactions are not uncommon, they are infrequent enough and individually complicated enough that I doubt it to be worth the programmers time to implement a 'wizard' for them.  It is also not something that the brokerage can easily get a handle on for them to say "Here are the 5 (or 50?) transactions your need to enter into Quicken.    
     
    Hope this works out for you.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Q_Lurker: Thanks for your June 1 reply. This is in a Roth account so not worried about capital gains, taxes, etc. Just want to be as accurate as possible and mirror how the brokerage handles it. Thanks again.
    To be as accurate as possible - it would not matter that this is a Roth or other non-taxable account.  To be as accurate as possible requires the 'set' of transactions I have outlined (or at least something similar.

    As to mirroring how the brokerage handles it -- I see part of this process as checking that the brokerage is doing something close to correct.  If you independently come up for ending shares, basis of shares, and cash that are close to what the brokerage shows, you can usually tweak the numbers in Quicken to get to the brokerage values.  If your independent numbers are not close, questions need to be asked.  

    And to you and other readers and posters, at some time (this month?) TTWO should release an IRS form 8937 that presents their opinion and the fair market value and typically outlines the math involved.  But even that opinion on FMV is not binding on you or your brokerage.  It can make sense to wait on the issuance of that form rather than entering data and then 'correcting' it.  
  • Megan Zuckerman
    Megan Zuckerman Member ✭✭
    @q_lurker, firstly, glad you were able to help me get off "mute"! second, this was really great and super helpful! thanks. i did follow your directions and now my shares match and my cost basis for the ttwo shares matches what you said it should. i put the add of ttwo (after the remove) with a txn date of 5/25 but an acquired date of 12/11/20. hope that is the correct choice.

    i also went and deleted all the downloaded transactions from my brokerage that relate to this merger / acquisition. i assume that is the right action? i attached my brokerage downloaded transactions to my original comment if you want to take a look at them.

    anyway, thanks again and thanks for getting me out of comment jail!
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    @Megan Zuckerman
    Your choices seem fine.
    Only outstanding question would be: Is your brokerage showing a correct cost basis for the 2 TTWO shares?  That detail was not in the snips from your June 1 post. 
  • Megan Zuckerman
    Megan Zuckerman Member ✭✭
    i just confirmed that my brokerage shows cost basis exactly matching your assessment and also now what i have correctly reflected in quicken after you transaction suggestions. one thing i am unable to confirm is if they have the correct acquired date as they dont list such a date. they do however seem to list a holding period as long term so most likely they have it right. thanks again for your support!
This discussion has been closed.