Help with calculating capital gains on merger of Express Scripts with Cigna

[Pinevalleyite]

I'd love to get a quick calculation example using sample numbers rather than words if someone can help me calculate how I'm supposed to handle the ESRX stock that merged into CI (Cigna) at the end of 2018. I have some lots at different basis so I can just plug real numbers in once I know how to do one of them. For example, suppose I had 162 shares of ESRX whose basis per share was $56.34. Cigna gave $48.75 per share plus gave .2434 of Cigna shares for each ESRX share. It appears on the day of the closed merger, Cigna was trading at about $178.01 per share. What is my taxable gain here and how does the math work?

[TomYoung · Accepted solution]

Using your numbers I get a gain of $5,745.05 on the Section 351 calculation. 

That's the lesser of the gain based on 98.55% of the total cash received ($7,782.99) vs. the gain calculated based on proceeds of $14,502.06 (39.43 shares + $7,782.99) minus  basis of $9,057.01 which is 99.232305% of the total basis.

Then you have a gain of $44.45 on the Redemption calculation.

That's proceeds of $114.41 cash minus the remaining basis of $70.07. 

You then sell your fractional share against cash in lieu.

Tom Young

[Pinevalleyite]

Can't thank you enough Tom. I forgot that you were the one who first responded with the explanation of how to do this and offered to do an example if I gave you some numbers. Now I'll be able to do the math using your example of the calculation to use. One last question. What is the new basis now for the resulting CI shares for when I sell those in the future?

[TomYoung]

Usual Sec 351: Old basis (99.232305%) - cash + reported gain.

[ktsmbeck]

sorry to be dense but where did the 98.55% come from?

[ktsmbeck]

Never mind that accounts for the 1.45% redemption

[acc252]

Can you assit me with my calculations for the same stock merger?  I have 2 lots of ESRX stocks , 216 shares with cost basis of $49.145 and another lot with 154 shares with cost basis of $49.625. What would reported as for cost basis for these lots and what would be my cost basis for my new shares of Cigna?

[TomYoung]

What Fair Market Value for the Cigna stock do you want to use?

[acc252]

$179.80...is there a right or wrong value for this?

[maglib]

@acc252  my broker used $182.185 and matches what we used for trading price

[TomYoung]

There's no cookbook formula for a stock's "fair market value".  Typically in the Form 8937 the company comes up with a number, which you're free to use or not, but Cigna didn't in this case.  You can ask your broker what per share figure they used in their 1099-B, if they used one at all.

[acc252]

I am lost with these calculations.  What would I enter for my cost basis in 1099 B in turbo tax.  My 1099-B from broker had Lot #1 of 216 share w/ proceeds of $10,530 with no cost basis (my old records showed cost per share was $49.145) and Lot #2 of 154 shares w/ proceeds of  $7507.50 with no cost basis (my records show purchased at $49.625/share).  The 1099 B also had sale of 0.05 share of Cigna stock with proceed of $10.63 with no cost basis (assuming this is the fractional share).  Can you help me with these calculations and put in plainly what would I enter for my cost basis to report in tax return using turbo tax.  I am comfortable using $182.185 as FMV for cigna shares.  I appreciate your help.

[TomYoung]

@acc252

See picture for sale itself using $182.185 as FMV

Report the CIL as "proceeds" for the fractional share using the same basis as cash received for no gain or loss.

Your basis in the resulting 90 Cigna shares is $16,182.00

Tom Young

[acc252]

Thank you Tom.  Appreciate all you help.

[maglib]

Just some added info and Tom young did a great job. I didn't redo the math he did.

https://ttlc.intuit.com/replies/7296848