Stock and Cash Merger

[gbstack]

I currently own 171 Time Warner Cable Shares. If the Charter merger with Time Warner Cable is approved I will receive $100 in cash for each share of Time Warner Cable plus 0.5409 shares of Charter for each share of Time Warner Cable.

Is it safe to assume the $100 in cash per share will count as income?

[brewer12345]

Usually you will see in a formal offer (filed with the SEC and a public document) some indication of the tax status of the merger offer. The target will also frequently have something on their investor relations website as they work on getting shareholders to vote for the deal.

[RE2Boys]

The $100 cash per share is considered proceeds from a capital stock sale and should be reported to you on a 1099B and is reportable on your Schedule D tax return. Whether you have a gain or loss will depend on your adjusted basis in Time Warner stock.

Time Warner has gone through many merger/acqusitions/spinoffs through the years....each likely had an impact to your basis, hope you have been keeping track of your basis after each event depending when and how you obtained the shares.

[jebmke]

You can avoid gains if there are any by donating the shares to charity prior to the merger. That is what I have done a couple of times with some legacy individual stocks we have.

[gbstack]

Quote:

Originally Posted by RE2Boys The $100 cash per share is considered proceeds from a capital stock sale and should be reported to you on a 1099B and is reportable on your Schedule D tax return. Whether you have a gain or loss will depend on your adjusted basis in Time Warner stock. Time Warner has gone through many merger/acqusitions/spinoffs through the years....each likely had an impact to your basis, hope you have been keeping track of your basis after each event depending when and how you obtained the shares.

Will my adjusted basis include my cost basis of $91.93 per share and the shares of Charter I will receive?

[kaneohe]

Cash Received in Mergers

[meierlde]

Quote:

Originally Posted by gbstack Will my adjusted basis include my cost basis of $91.93 per share and the shares of Charter I will receive?

Yes you take the total proceeds of the cash and the new stock, (using the value of the stock on the day you get it), and use that as the sales price, then subtract the associated basis. The new stock then gets a new basis based on the day you got it as well. So typically it is a long term capital gain, that in general (unless you are in the 1%) is taxed at 15%

[gbstack]

Quote:

Originally Posted by meierlde Yes you take the total proceeds of the cash and the new stock, (using the value of the stock on the day you get it), and use that as the sales price, then subtract the associated basis. The new stock then gets a new basis based on the day you got it as well. So typically it is a long term capital gain, that in general (unless you are in the 1%) is taxed at 15%

Regardless of the stock value on the day I get it would the maximum capital gain be the 171 shares x $100.00?

[kaneohe]

Quote:

Originally Posted by gbstack Regardless of the stock value on the day I get it would the maximum capital gain be the 171 shares x $100.00?

Here's how you figure your gain:

Step 1: Determine the overall gain you have on the exchange. To do this, you need to know the value per share of the merger consideration, including both shares and stock. Generally the company gives you this information at the time of the merger. If you can't find this information, it's likely to be on the company's web site. Multiply that figure times the number of shares you held to determine the total consideration you received. Then subtract your total basis in the shares you held to get the overall gain.
Step 2: The amount of gain you report is the lesser of the amount of gain from step 1 or the amount of cash you received.
Step 3: Your basis in the shares you received is equal to your basis in the old shares, increased by the amount of gain you reported and decreased by the amount of cash you received.

[gbstack]

Quote:

Originally Posted by kaneohe Here's how you figure your gain: Step 1: Determine the overall gain you have on the exchange. To do this, you need to know the value per share of the merger consideration, including both shares and stock. Generally the company gives you this information at the time of the merger. If you can't find this information, it's likely to be on the company's web site. Multiply that figure times the number of shares you held to determine the total consideration you received. Then subtract your total basis in the shares you held to get the overall gain. Step 2: The amount of gain you report is the lesser of the amount of gain from step 1 or the amount of cash you received. Step 3: Your basis in the shares you received is equal to your basis in the old shares, increased by the amount of gain you reported and decreased by the amount of cash you received.

Perfect - Thanks for your help!!