Acquistions

[stevetone]

Help! I am having difficulty visualizing what transactions to use in this scenario:

Company A acquires Company B for $2.39/share plus .49 shares of Company A. Plus, any of the resulting fractional shares are paid out in cash.

I am sure that this is described somewhere...but I have been unable to find it.

What I have tried is to use Transfer Out for all Company B shares, Transfer In for Company A shares (adjusted), Return of Capital for cash, and a Redemption for fractional share sale. Yet, it just doesn't feel right (nor does the FM Capital Gains report it agree with Fidelity's capital gains report after a subsequent sale of all Company A shares (the difference is in the cost basis))...

Steve

[Mark]

Hi Steve,

This sounds like it would be a combination of 3 transactions:

1) Received dividend of $2.39/share. Maybe this is a return of capital? You would need to verify the specifics. It will affect the cost basis depending on whether you categorize as a return of capital or dividend.

2) Split with a ratio of 0.49 for 1.

3) Sell of any fractional shares.

[stevetone]

Thanks for the quick reply. Yes, the distribution was a Return of Capital.

Instead of a Split, I used the Transfer Between transaction. What I did was:

1. Used a Return of Capital transaction from Company B for the cash part of the acquisition.

2. Used Transfer Between from Company B to Company A, specifying the beginning and ending share amounts, which were different (.49 for 1).

3. Redeemed the resulting fractional shares of Company A.

BTW, it appears that Fidelity does not account for the cost basis for the fractional shares correctly in their Capital Gains report--they indicate a cost basis of zero. I'm fairly confident that FundManager has it right.