Record a Merger plus Cash transaction
The information below is a discussion of Merger + Cash transactions. For instrictions on specific transactions, please see the Mergers section of our FAQ at:
While most mergers will result in some cash due to a sale of fractional shares, what we call a Merger with Cash occurs when the club receives cash simply for having owned shares in the acquiring company. Due to the nature of the Merger with Cash transaction, we do suggest checking with ICLUBcentral support for information before attempting the transaction.
First choose whether the transaction was fully or partially taxable. You can check the company’s investor relations page for a form 8937, which describes the merger details, or contact ICLUBcentral support; we can research the merger transaction, and let you know the details.
For tax purposes, the partially taxable form of this merger will often generate a Capital Gain entry, as well as a Return of Capital, to account for the money received. The fully taxable form of this merger only results in capital gains, and so is handled as a sale of one stock, followed by a purchase of the other.
After taxable status, the next detail will be the Cash per share received. Some brokers may include this on the statement. If not, you can always divide cash received (other than for fractional shares) by the number of shares you held in the original company, to show the Cash per share received.
If you know the exchange rate, enter it, and the site will calculate the number of shares received. As with a regular merger, don’t forget to count fractional shares. Even if they are sold for cash, they need to be included as part of the merger transaction. Again, this information can usually be found on the company's investor relations site, or by checking with ICLUBcentral.
Price per share for the new company is next. As with the other details, this can usually be found by checking the investor relations page, but can also usually be found simply by checking the closing price of the new stock on the day of the merger. As always, you can also check with ICLUBcentral.
Reorganization fees are more common in a Merger with cash transaction, so a separate field is provided here. Since they are not part of all transactions, this is something you will need to check your broker’s statement for.
The symbol of the new company you can fill in from the broker’s statement.
The Shares received and Price per share will automatically be filled in, based on what you entered previously.
Cash received is one of the last things to fill in. Make sure you only enter cash received for fractional shares, not the larger amount listed in the Cash received section of the transaction.
Choose the account that the cash went to, click Submit, and the transaction is complete.
Note: In Merger with cash transactions, realized capital gains, and the cost basis of the new shares have a component dependent on the price per share chosen in the entry screens.
In our experience brokers tend to use the price per share published by the companies on their websites in their guidance to shareholders. If the companies publish guidance with a share price, we use that share price in our instructions to minimize possible differences between the accounting records and broker information. In cases where no guidance is available, we will choose the lower of the opening or closing price on the effective date.
Either of these prices is acceptable to the IRS, and by choosing the lower price, some realized capital gains will be deferred to a later date. However, there is always the chance the price we choose will not be the price chosen by your broker. The gain from the merger and cost basis recorded in your accounting records will then differ from your broker information. Because of the lack of detail in the tax code, both our choice and your broker’s choice are considered reasonable estimates of market value for the shares received. Your records are NOT incorrect because they differ from your broker.
Tax return forms have specific areas to report these usually small differences. Our tax printer software handles these adjustment entries automatically in the normal operation of the software.