How to record a “complex” Stock Exchange Transaction

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agpatrizio
agpatrizio Member
edited June 2023 in Investing (Windows)

I owned AUY (Yamana Gold) and they did a stock exchange transaction with Agnico Eagle Mines and Pan Amern Silver. The shares I owned in AUY were exchanged for shares in the other companies. How do I record this transaction in Quicken and keep my basis?

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  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
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    Assuming that his is a tax-free exchange (I haven't looked it up) then the Quicken Action to use is the "Corporate Acquisition (stock for stock) Action.

    Based upon your entries this will "translate" the shares you tendered into shares received - lot by lot - and preserve the date the original shares were acquired and the basis.

  • Ps56k2
    Ps56k2 SuperUser ✭✭✭✭✭
    edited May 2023
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    here is a quick search of the deal - which you should have received -

    Pursuant to the Arrangement, Yamana shareholders received, in respect of
    each Yamana Share (AUY) held,
    US $1.0406 in cash paid by Agnico Eagle Mines (AEM)
    0.0376 of a common share of Agnico Eagle Mines (AEM)
    0.1598 of a common share of Pan American Silver (PAAS)

    QWin - R54.16 - Win10

  • splasher
    splasher SuperUser ✭✭✭✭✭
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    @Tom Young How does this work for two acquiring companies? Doesn't the first company in the acquisition "eat up" all of the original shares in Quicken and leave nothing for the second company to acquire?

    -splasher using Q continuously since 1996
    - Subscription Quicken - Win11 and QW2013 - Win11
    -Questions? Check out the Quicken Windows FAQ list

  • Ps56k2
    Ps56k2 SuperUser ✭✭✭✭✭
    edited May 2023
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    yeah .. will be interesting to see how to handle this within Quicken with the TWO participating stocks plus CASH …

    Guessing a couple of manual transactions to liquidate shares of the AUY and then add shares of the AEM and PAAS plus some leftover cash.

    Wonder what the brokerage downloaded or is showing in their statement ?

    QWin - R54.16 - Win10

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited May 2023
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    I completely missed the fact that two companies were involved here, so the "Corporate Acquisition (stock for stock) Action isn't going to work. Since cash was involved and two different company's shares were acquired I doubt this will end up being tax free. At a guess the "proceeds" will be the FMV of the stock plus cash, but that's not anything other than a guess.

    I'm trying to find some definite tax handling of the merger/acquisition and since all the companies involved are foreign that might be difficult.

  • splasher
    splasher SuperUser ✭✭✭✭✭
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    Would it work if you did a spin-off w/cash for one of the companies and then an acquisition of the remaining stock for the other company?

    -splasher using Q continuously since 1996
    - Subscription Quicken - Win11 and QW2013 - Win11
    -Questions? Check out the Quicken Windows FAQ list

  • splasher
    splasher SuperUser ✭✭✭✭✭
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    I tried this with some made up numbers and the spin-off/acquisition came up with the correct # of shares and the basis made sense for my made up numbers, but I wasn't sure how to handle the cash paid, but that might be handled with a manual proportional RtnCap applied to each lot of Agnico Eagle Mines.

    I wouldn't do anything on this until the brokerage shows exactly what the end numbers should be and a few other users here on the forum weigh in with their comments.

    -splasher using Q continuously since 1996
    - Subscription Quicken - Win11 and QW2013 - Win11
    -Questions? Check out the Quicken Windows FAQ list

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
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    Yes, it is to be treated as a sale, not some sort of non-taxable exchange:

    ________________________________________________________________________

    The Yamana Share Exchange and the Pan American Share Exchange (together, the “Exchanges”) are intended to be treated as part of an integrated plan whereby, for U.S. federal income tax purposes, the Yamana Share Exchange is treated as a redemption of each U.S. Holder’s interest in Yamana, the Pan American Share Exchange is treated as a sale or exchange and, taken together, the Exchanges are treated as a taxable sale or exchange of a U.S. Holder’s Yamana Shares for the Consideration (the “Intended Tax Treatment”). There can be no assurance that the IRS will not challenge the Intended Tax Treatment or that the U.S. courts will uphold the Intended Tax Treatment. U.S. Holders are urged to consult their own tax advisors regarding the proper reporting of the Arrangement. The remainder of this disclosure assumes that the Exchanges will be treated consistently with the Intended Tax Treatment.

    Subject to the discussion below regarding the application of the PFIC rules to the Exchanges, a U.S. Holder of Yamana Shares will generally recognize capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between (a) the sum of the Cash Consideration and the aggregate fair market value of the Agnico Shares and Pan American Shares received by such U.S. Holder in the Exchanges (including any cash in lieu of a fractional Agnico Share) and the (b) U.S. Holder’s adjusted tax basis in the Yamana Shares surrendered in the Exchanges for such Consideration, in each case determined in U.S. dollars. For this purpose, U.S. Holders of Yamana Shares must calculate gain or loss separately for each identified block of Yamana Shares (that is, Yamana Shares acquired at the same cost in a single transaction) exchanged in the Exchanges. The basis of the Agnico Shares and Pan American Shares received in the Exchanges will equal their fair market value, and the holding period for the Agnico Shares and Pan American Shares will begin on the day after the Exchanges. Cash received from Pan American in lieu of fractional Pan American Shares in the Pan American Share Exchange will be taxable to U.S. Holders. U.S. Holders are urged to consult their own tax advisors as to the tax consequences of cash received from Pan American in lieu of fractional Pan American Shares in the Pan American Share Exchange, including the potential application of Section 304 of the Code (“Section 304”) and whether such cash is treated as a dividend or results in capital gain or loss for U.S. federal income tax purposes.

    ________________________________________________________________________

    So the sequence would be along the lines of:

    1. Calculate the amount of proceeds as ($1.0406 x # of Yamana shares) + FMV of Pan American Silver shares + FMV of Agnico shares "as if" fractional shares were issued.
    2. Sell Yamana Gold for the amount of proceeds.
    3. Use the "cash" from the sale to buy the shares of Pan American Silver and Agnico you would have received if fractional shares were issued using the FMVs.
    4. Sell any fractional shares for the cash in lieu, recognizing gain or loss.

  • Paul Guagliardo
    Paul Guagliardo Member ✭✭
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    Tom: I don't know if there is an easier way, but your sequence worked perfectly. I'm not concerned with the tax consequences since this is in my Roth. But I did want to accurately reflect the number of shares in and out. Your suggestion did that. I then went back and deleted the transactions downloaded from the brokerage via Quicken. So far, so good. Thanks.
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