Can you help Baxalta & Shire merger cash and stock

[bill-jody]

I had shares in Baxalta Inc which were mergered with Shire PLC in June 2016.  I received cash and stock in the new company Shire.  How do I report the stock received but not sold.  And is it taxable.

[TomYoung · Accepted solution]

The Shire site has a Q. and A. for the transaction:

Q. Will I be taxed on the Shire securities that I receive in the merger?
A. Baxalta stockholders should consult their tax advisors as to the particular tax consequences to them of the transaction, including the effect of U.S. federal, state and local tax laws and foreign tax laws

The receipt of the per share merger consideration pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Generally, for U.S. federal income tax purposes, if you are a taxable U.S. holder (as defined in the proxy statement/S-4), you will recognize gain or loss equal to the difference between (i) the sum of cash and the fair market value (as of the effective time) of the Shire securities you receive and (ii) your adjusted tax basis in the Baxalta shares exchanged pursuant to the merger. If you are a non-U.S. holder (as defined in the proxy statement/S-4), the merger generally will not result in tax to you under U.S. federal income tax laws unless you have certain connections with the United States however there may be tax consequences in other jurisdictions
For further information on the tax consequences of the merger, see the section of the proxy statement/S-4 titled “Material U.S. Federal Income Tax Consequences” starting on page 228


Q. What is the fair market value?
A. The closing price for SHPG of the newly issued shares is $190.04 on June 2nd (for the ADSs)

Tom Young

[bill-jody]

ok, if taxable where in premier do I enter the shares of stock received?

[TomYoung]

How has the broker presented the "proceeds"?  Is it strictly the cash received @ $18 per share tendered or is it cash plus FMV of stock?  The latter, I'd think.   Either way you don't "enter the shares of stock received"  in your income tax return.  

Just like any other sale of stock you enter the proceeds of the sale, ($18 + .1482 x $190.04) ~ $46.1639 per share tendered and you enter your date(s) of acquisition and cost basis using the "Stocks, Mutual Funds, Bonds, Other" interview.

[bill-jody]

The broker has FMV $190.04 total $17,855.19 for 93 shares of stock.

[TomYoung]

I'm not sure if "for 93 shares of stock" refers to the shares you tendered or the shares you received.  I guess it must be "received", but $190.04 x 93 = $17,673.72, not $17,855.19.  Or maybe that's really 93.955 shares, a combination of the proceeds and the cash in lieu?  But either way that suggests you tendered something like 630 shares and you should have received 630 x $18 = $11,340 in cash for total proceeds somewhere in the $29,000 range.

I can't see what you see and trying to get this information seems like pulling teeth.  

I've told you

1) it's a taxable deal
2) your proceeds are the sum of the cash and FMV of the stock.

I'd expect that the broker has Box 1d filled in with "Proceeds".  Use that.  Then enter your basis of the stock tendered.  That should be all there is to it.

[iltf52]

Is the gain not limited by the cash received even though it's considered a taxable transaction? Why would this be different than most mergers and be gain be limited to cash received?

[TomYoung]

There a various ways a "cash + stock" deal might be accounted for in an income tax return.  There is no "one size fits all" method to use.  The method to use depends on how the deal is structured.  I've forgotten at this point the exact details of this deal but it probably was an "inversion" transaction and in those deals the ENTIRE PROCEEDS - cash plus stock - is applied against basis.

[iltf52]

Here is a link to frequently asked questions <a rel="nofollow" target="_blank" href="http://investors.shire.com/~/media/Files/S/Shire-IR/presentations-webcast/baxalta-acquisition/faqs-s...>. It also refers you to proxy statement/s-4, which I found no help. It is at <a rel="nofollow" target="_blank" href="http://investors.shire.com/Baxalta-acquisition.aspx">http://investors.shire.com/Baxalta-acquisition....>. Please explain why this is not limited to cash received and basis carries over to the new stock?

[TomYoung]

"Please explain why this is not limited to cash received..."

Because it IS an inversion and that's what the tax rules dictate.

"Please explain why ... basis carries over to the new stock?"

That question isn't clear but I assume you are asking why the new stock has a basis that's the same as the FMV of that stock on date of acquisition.

It's "as if" you were paid ENTIRELY IN CASH and then decided to take some part of that cash and buy some of the new stock.  Hence the new stock has a basis of what you paid for it and a holding period that starts on the acquisition date.

[iltf52]

There seems to be two different stocks, shire ads is traded on the NY stock exchange and the special election stock is foreign and not traded on the NY stock exchange. I imported my brokerage statement including the delisted Baxalta shares proceeds per the broker statement and cash, however, turbo tax limited the gain to cash or boot received. I did not claim any basis, as it is indeterminate at this time.

[TomYoung]

I can't see your 1099-B so I have no idea how the trade was reported to you, really.  But it sounds like TurboTax only recognized as "proceeds" the cash and, since you reported no basis, limited the gain to that.

But I assure you that TurboTax is not making any "judgements" about how the transaction really should be reported to the IRS.  It's completely dumb with respect to cash plus stock deals.

[iltf52]

The 1099 reported cash received separately from the delisted shares. The delisted shares had a proceed amount too. However the basis was before 2011 and could not be supplied by them.