18103
Hello,
* I bought 50 shares of ACDO (Accredo) on 4/8/2003 @13.78 / share ---> total cost = $696.00
* MHS (Medco Health Solutions) bought ACDO on 8/18/2005 ---> I received 24 shares of MHS + $1,100 cash + $27.45 for a fraction of MHS share
* MHS split 2:1 on 1/24/2008 ---> I received 24 shares of MHS
* ESRX (Express Scripts) bought MHS on 4/3/2012 ---> I received 38 shares of ESRX + $1,382.40 cash + $50.31 for a fraction of ESRX share
What is my cost basis for the 38 shares of ESRX?
I appreciate all the responses in advance.
Thanks, UNP
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There are a few too many variables possible here to provide a definitive answer. You need to identify the tax treatment for each acquisition transaction as per the acquisition agreements. You may have to track these down via the SEC's archives. For instance, the final prospectus for the Medco/Accredo transaction is at the following link: https://www.sec.gov/Archives/edgar/data/1170650/000119312505141636/d424b3.htm#toc86726_10
with information regarding tax consequences in pp 60-63.
Typically, in transactions of this nature, you are simply "transferring" your basis from your original shares into the new shares (including holding period). Tax free transactions with only the exchange of shares are the easiest to deal with. For example purposes, let's say that your 50 shares of ACDO converted to 24.5 shares of MHS and there was no cash consideration. Your basis per share would be $696/24.5 but you would be deemed to have sold the 0.5 of a share with any corresponding gain/loss. Your remaining total basis would be the 696 less the prorata basis of the fractional share (e.g., 696 / 24.5 * 24.0). How the $1100 cash consideration is to be treated depends on the transaction .. some are called a dividend, others a return of capital, others a capital gain. Again, you have to go back to the transaction documents for a definitive. If you already fully recognized the cash compensation in your 2005 tax return, then the $1100 probably would not impact the your basis in MHS stock.
Regarding the split, it is easy. Your shares doubled on the split date; your basis per share halved. (Total basis unchanged).
EXRX --> MHS transaction has same character as the MHS --> ACDO so comments above apply here as well. But again, you have to consult the actual transaction documents to identify the intended tax treatment.
Sorry I can't be of more help. Unfortunately, as in your case, the disposition of merger shares often does not occur in close proximity to the actual merger. After learning this the hard way, I've become very diligent in recording the impact of such transactions in the same year using Quicken.
Hello KJGreen,
Thank you for your nice explanation.
Regards,
unp
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