cost basis for merger - Burlington vs Berkshire
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From: ps56k on 19 Feb 2010 22:23 I was holding Burlington which was just acquired by Berkshire. So - my Schwab download the other day reflected this transaction : with a couple of cash entries - with a Remove Shares for the BNI - with a Add Shares for the BRK - But now - the BRK has no entry for a Cost Basis - it's zero - How should I correct these entries to reflect an ongoing cost for BRK, and also so I can see how it's doing with respect to gain/loss. -- ---------------------------------- "If everything seems to be going well, you have obviously overlooked something." - Steven Wright
From: TomYoung on 20 Feb 2010 13:27 On Feb 19, 7:23 pm, "ps56k" <pschuman_no_spam...(a)interserv.com> wrote: > I was holding Burlington which was just acquired by Berkshire. > > So - my Schwab download the other day reflected this transaction : > with a couple of cash entries - > with a Remove Shares for the BNI - > with a Add Shares for the BRK - > > But now - the BRK has no entry for a Cost Basis - it's zero - > > How should I correct these entries to reflect an ongoing cost for BRK, > and also so I can see how it's doing with respect to gain/loss. > Looking at "the deal" it seems like you could have accepted all cash for your Burlington stock, all Berkshire Hathaway stock or some combination of cash and stock. Since you mention "a couple of cash entries" I'm guessing you took the combination? If you took "all stock" then I'd think you'd mention only one cash entry, the cash you'd receive "in lieu of" a partial share of BRK stock. Maybe you need to lay out the numbers here so someone can give you some assistance because the accounting (and correcting entries you need) really depend on the details. Tom Young
From: ps56k on 20 Feb 2010 17:50 "TomYoung" <sombodee(a)gmail.com> wrote in message news:adf01aca-d85f-4fdc-848a-6272dbfeadd9(a)w27g2000pre.googlegroups.com... On Feb 19, 7:23 pm, "ps56k" <pschuman_no_spam...(a)interserv.com> wrote: > I was holding Burlington which was just acquired by Berkshire. > > So - my Schwab download the other day reflected this transaction : > with a couple of cash entries - > with a Remove Shares for the BNI - > with a Add Shares for the BRK - > > But now - the BRK has no entry for a Cost Basis - it's zero - > > How should I correct these entries to reflect an ongoing cost for BRK, > and also so I can see how it's doing with respect to gain/loss. > Looking at "the deal" it seems like you could have accepted all cash for your Burlington stock, all Berkshire Hathaway stock or some combination of cash and stock. Since you mention "a couple of cash entries" I'm guessing you took the combination? If you took "all stock" then I'd think you'd mention only one cash entry, the cash you'd receive "in lieu of" a partial share of BRK stock. Maybe you need to lay out the numbers here so someone can give you some assistance because the accounting (and correcting entries you need) really depend on the details. Tom Young --- My choice was all stock - I only had a little... The three cash transactions were : 1 - the last/current div for BNI 2 - the cash, as part of the deal 3 - the cash for partial shares The Remove Shares for BNI netted out the original cost... I just went back to the BRK transaction - and for my performance info - updated the Bershire Add Shares entry to include a "price" of $76, so I can see how the BRK stock is doing since the merger vs having a zero basis...
From: TomYoung on 20 Feb 2010 21:36
On Feb 20, 2:50 pm, "ps56k" <pschuman_no_spam...(a)interserv.com> wrote: > "TomYoung" <sombo...(a)gmail.com> wrote in message > > news:adf01aca-d85f-4fdc-848a-6272dbfeadd9(a)w27g2000pre.googlegroups.com... > On Feb 19, 7:23 pm, "ps56k" <pschuman_no_spam...(a)interserv.com> wrote:> I was holding Burlington which was just acquired by Berkshire. > > > So - my Schwab download the other day reflected this transaction : > > with a couple of cash entries - > > with a Remove Shares for the BNI - > > with a Add Shares for the BRK - > > > But now - the BRK has no entry for a Cost Basis - it's zero - > > > How should I correct these entries to reflect an ongoing cost for BRK, > > and also so I can see how it's doing with respect to gain/loss. > > Looking at "the deal" it seems like you could have accepted all cash > for your Burlington stock, all Berkshire Hathaway stock or some > combination of cash and stock. Since you mention "a couple of cash > entries" I'm guessing you took the combination? If you took "all > stock" then I'd think you'd mention only one cash entry, the cash > you'd receive "in lieu of" a partial share of BRK stock. > > Maybe you need to lay out the numbers here so someone can give you > some assistance because the accounting (and correcting entries you > need) really depend on the details. > > Tom Young > --- > My choice was all stock - I only had a little... > The three cash transactions were : > 1 - the last/current div for BNI > 2 - the cash, as part of the deal > 3 - the cash for partial shares > > The Remove Shares for BNI netted out the original cost... > I just went back to the BRK transaction - and for my performance info - > updated the Bershire Add Shares entry to include a "price" of $76, > so I can see how the BRK stock is doing since the merger vs having a zero > basis... I see I didn't read far enough into the description of "the deal." From the Definitive Proxy Statement: "The U.S. Federal income tax consequences of the merger to a U.S. holder of BNSF common stock will depend on whether such U.S. holder receives cash, shares of Berkshire common stock or a combination of cash and stock in exchange for such U.S. holders BNSF common stock. At the time a U.S. holder makes a cash or stock election pursuant to the terms of the merger agreement, such U.S. holder will not know whether, and to what extent, the proration provisions of the merger agreement will alter the mix of consideration such U.S. holder will receive. As a result, the tax consequences to such U.S. holder will not be ascertainable with certainty until such U.S. holder knows the precise amount of cash and shares of Berkshire common stock that such U.S. holder will receive pursuant to the merger." So, it sounds like you asked for stock but got stock and cash, plus cash for the fractional share, hence the use of the term "cash entries." This is one of those complicated transactions where Schwab probably couldn't or wouldn't even attempt to make all the calculations you need. More from the Definitive Proxy Statement: "Exchange of BNSF common stock for a combination of Berkshire common stock and cash Except as discussed below, see Cash in Lieu of Fractional Shares of Berkshire Common Stock, a U.S. holder who exchanges shares of BNSF common stock for a combination of Berkshire common stock and cash will recognize gain (but not loss) equal to the lesser of (i) the excess, if any, of the amount of cash plus the fair market value of any Berkshire common stock received in the merger, over such U.S. holders adjusted tax basis in the shares of BNSF common stock surrendered by such U.S. holder in the merger and (ii) the amount of cash received by such U.S. holder in the merger (other than cash received in lieu of fractional shares of Berkshire common stock). For purposes of this calculation, the fair market value of Berkshire common stock is based on the trading price of that stock on the date of the merger, rather than on the ten-day average price used in calculating the number of shares of Berkshire common stock to be issued to the stockholder. In the case of any U.S. holder who acquired different blocks of BNSF common stock at different times and at different prices, any realized gain or loss will be determined separately for each identifiable block of shares exchanged in the merger, and a loss realized on the exchange of one block of shares cannot be used to offset a gain realized on the exchange of another block of shares. Such U.S. holder should consult its tax advisor prior to the exchange with regard to identifying the bases or holding periods of the particular shares of Berkshire common stock received in the merger. Generally, a U.S. holders aggregate tax basis in the Berkshire common stock received by such U.S. holder in the merger, including any fractional shares deemed received by the U.S. holder under the treatment discussed below in Cash in Lieu of Fractional Shares of Berkshire Common Stock, will equal such U.S. holders aggregate tax basis in the BNSF common stock surrendered in the merger, increased by the amount of taxable gain or dividend income (see below), if any, recognized by such U.S. holder in the merger (other than with respect to cash received in lieu of fractional shares of Berkshire common stock), and decreased by the amount of cash, if any, received by such U.S. holder in the merger (other than cash received in lieu of fractional shares of Berkshire common stock). The holding period for the shares of Berkshire common stock received in the merger, including any fractional shares deemed received by the U.S. holder under the treatment discussed below in Cash in Lieu of Fractional Shares of Berkshire Common Stock, generally will include the holding period for the shares of BNSF common stock exchanged therefor." As you can see, your basis in Berkshire, including the fractional share you sold, will depend on whether you recognize a gain or a loss on the on the BNSF tendered and the amount of cash received. This is one of those cases where you basically need to do the calculations outside of Quicken to determine gain or loss on BNSF and the resulting basis in Berkshire. *Then* you make entries in Quicken to get to those numbers. If you can come up with the numbers but can't figure out how to make entries in Quicken to get to where you need to be then post the numbers and someone here can help in that regard. Tom Young |