How to handle income from Aetna merger with CVS? I received $145 in cash and about 0.8 Shares of CVS stock for each original AET share. These would be long term gains

[jacob_adams]

Cash was received as merger security exchange.  I am asking this question so I can submit estimated taxes

[Opus 17]

What is your cost basis in the Aetna shares?

This is what I think happens.  Suppose your Aetna shares cost $200 each when you bought them.  The payout is not taxable, but reduces your cost basis.  So now your cost basis for those shares is $55, which transfers to CVS so your cost basis for each 0.8 CVS share is $55, or $68.75 per share.   So the $145 payment is not taxable now, but the reduction in cost basis means you will have a larger capital gain whenever you sell the CVS shares.

[Edited: This is incorrect, see correct answer below.]

[Critter]

<a rel="nofollow" target="_blank" href="http://www.aetna.com/investors-aetna/assets/documents/2018/faq-exchange-of-aetna-shares-for-merger-c...>

[Opus 17]

Alternatively, if your cost basis in the Aetna shares was $100, you would take $100 cash free, $45 is a long term capital gain, and your cost basis in the new CVS shares is 0.

[Edited: this is incorrect, see below.]

[jacob_adams]

Thanks.  The cost basis for the original shares actually is quite minimal about $4.02 a share.  Thus I earned money and quite a bit so I want to pay any estimated taxes due. Thanks again

[jacob_adams]

Thanks Critter 2 and Opus 17.  The Aetna guidance was really helpful (I had not received it yet) and the interpretation made it chrystal clear

[bobtru]

Hi Jacob. Where did you find the most helpful info on this? I am in a similar situation, doing taxes for my 98 year olf father who bought Aetna decades ago. The stock split 3 or 4 times, and actually I am not even sure I will ever recover the original cost basis. Was there another website you found helpful?

[Opus 17]

Well, you got quite a deal then. 

Based on the FAQ, it seems my comments were incorrect.  Your long term capital gains this year is the total of the FMV of the CVS shares ($80.27 per share on 11/28) PLUS the $145 per share payment, minus your cost basis.  So for 100 Aetna shares, your gain would be (100 x $145) plus (80 x $80.27) minus (100 x $4.02).

However, your cost basis in the new CVS shares is their market price on 11/28, and is not adjusted by the payment or the cost basis of the Aetna shares.  This means you realize a lot more gain now than I assumed in my first comments, but you have a higher basis in the CVS shares so will have much smaller gain if you sell them in the future.

Basically, the tax treatment is the same as if you sold your Aetna shares for $209.22 cash, and then used that cash to buy CVS shares.

Sorry for my mistake earlier. 

[Opus 17]

Actually, the equivalent sale price is $212.75, since you exchanged 1 Aetna share for $145 cash plus 0.8378 shares of CVS at $80.27.

[mingh]

how do you determine the market price of CVS share on 11/28 was $80.27 per share since the price fluctuated during the trading day?

[mingh]

From the same company I bought stocks with different prices in different times many years ago, all I remember is that the lowest and highest prices I paid, how do I calculate the cost basis?

[ihatedoing-these]

keeps asking for mortgage lender when i don't have one

[Anonymous]

visit the aetna or cvs websites and look for shareholder services

see this link

http://investors.cvshealth.com/stock-information/cost-basis-calculator