I held ISO, ESPP and RSU stocks from Atmel before it was acquired by Microchip in April, 2016. I found no area in Turbotax to enter additional information as 'Merger' or 'Cash in lieu' for each lot of sale. Somewhere within this community, I saw the answer to calculate the gain as: the lesser of cash received or the tentative gain which is the proceeds - cost basis of the acquired stock. For example, the ISO sale lot that I enter has the tentative gain which is more than the cash received. But Turbotax chooses the tentative gain to calculate the actual gain. So please help and clarify how this gain is determined. Thanks.
You cannot rely on any answer as to how to deal with a "cash plus stock" acquisition in here unless the transaction involves the same companies as yours. There is no "one size fits all" answer to a stock plus cash transaction.
You are fortunate in that the Microchip/Atmel transaction is very easy to understand and straightforward. The sale is fully taxable to shareholders tendering Atmel stock and they may recognize gain or loss based on the difference between their basis in the Atmel stock tendered and the proceeds received, In this case the per share proceeds are $7.00 in cash and the fair market value of 0.0237 of a share of Microchip common stock.
Microchip has suggested using a per share price for Microchip of $48.225 ( http://ww1.microchip.com/downloads/en/Finance/ATML%20Cost%20Basis%20Info.pdf ) If you use their fair market value figure the proceeds per share work out to $8.1429.
So you may simply sell your shares using that $8.1429 per share proceeds figure, period. It's "as if" you sold your stock for cash at a per share selling price of $8.1429 and then immediately turned around and used some of that cash to buy Microchip stock.
The "cash in lieu" is simply the "proceeds" to use for the sale of the fractional share of Microchip stock that was sold instead of being issued to you. All your Microchip stock will have a per share basis that's the same as that $48.225 fair market value figure, so if you end up selling, say, .25 shares of Microchip then the basis for that fractional share is $12.06.
You holding period for the new Microchip shares starts the day after the date of the merger.
You cannot rely on any answer as to how to deal with a "cash plus stock" acquisition in here unless the transaction involves the same companies as yours. There is no "one size fits all" answer to a stock plus cash transaction.
You are fortunate in that the Microchip/Atmel transaction is very easy to understand and straightforward. The sale is fully taxable to shareholders tendering Atmel stock and they may recognize gain or loss based on the difference between their basis in the Atmel stock tendered and the proceeds received, In this case the per share proceeds are $7.00 in cash and the fair market value of 0.0237 of a share of Microchip common stock.
Microchip has suggested using a per share price for Microchip of $48.225 ( http://ww1.microchip.com/downloads/en/Finance/ATML%20Cost%20Basis%20Info.pdf ) If you use their fair market value figure the proceeds per share work out to $8.1429.
So you may simply sell your shares using that $8.1429 per share proceeds figure, period. It's "as if" you sold your stock for cash at a per share selling price of $8.1429 and then immediately turned around and used some of that cash to buy Microchip stock.
The "cash in lieu" is simply the "proceeds" to use for the sale of the fractional share of Microchip stock that was sold instead of being issued to you. All your Microchip stock will have a per share basis that's the same as that $48.225 fair market value figure, so if you end up selling, say, .25 shares of Microchip then the basis for that fractional share is $12.06.
You holding period for the new Microchip shares starts the day after the date of the merger.