ARCC acquisition of ACAS

[bwccolorado]

Happy New Year!

I tried to leverage the topic, "AMC acquisition of CKEC", but cant seem to apply the same rules due to a different handling. I'll try to be brief and specific about was supposed to happen, and what transactions occurred in my account.
Basically, I've 2 questions.
1 - How to record within my ACAS investment (new ARCC investment?)
2 - Cost basis to apply to new ARCC shares

On 4 January, ACAS shareholders received total consideration of approximately $18.06 per share comprised of:
(i) $14.41 per share from Ares Capital consisting of approximately $6.48 per share of cash and 0.483 ARCC shares for each ACAS share at a value of $7.93 per ACAS share (based on the closing price per share of ARCC on January 3, 2017)
(ii) $2.45 per share of cash from American Capital’s previously announced sale of American Capital Mortgage Management, LLC
(iii) approximately $1.20 per share of cash as transaction support

Original ACAS shares - 1120.533
Recorded transactions
Sale of ACAS 1120.533 @ $10.059998 = $11,272.56
Dividend from ACAS = $78.44
Added ARCC shares - 541

Is this simply
1 - Recorded ACAS sale of 1120.533sh @$10.06/sh
2 - Recorded ACAS dividend of $78.44
3 - Recorded (new investment) ARCC purchase of 541sh with cost basis $7.93/.483 per share

Thanks for any help on this!

Brendan

[Mark]

Hi Brendan,

Are the "Recorded transactions" from your broker's statement? I'm assuming so. It looks like your broker is saying that $11,272.56 of the total cash received was the sell value of your shares, and the remaining 78.44 is to be considered some sort of distribution.

1120.533 shares * $(6.48 + 2.45 + 1.20) = $11351
$11272.56 + $78.44 = $11351

I'm not sure how much of your original cost basis should be considered ARCC basis, but it seems like it may be 48.3% of the original ARCC basis, since 0.483 of those shares were traded for ACAS shares. You may have to ask your broker, or decide how much of the cost basis should be transferred. The amount of cost basis transferred would be $X below. The difference between the cost basis and the market value of ARCC would be $Y below.

Sale of ACAS 1120.533 @ $10.059998 = $11,272.56
Dividend from ACAS = $78.44
Return of Capital from ACAS = $X
Other Distribution from ACAS = $Y
Transfer In 541 ARCC Shares with a Market Value of $(X + Y) and Cost Basis of $X

The idea is you are moving cost basis and a total market value from ACAS to ARCC. By recording a Return of Capital you move the cost basis. The total of the Return of Capital plus the "Other" distribution would sum to the market value of the ARCC shares. This way you are accounting for the market value and cost basis transferred between investments.

[bwccolorado]

Thanks, Mark,

That'll help with the FM accounting and question for my broker.