How to handle APC merger to OXY?

[richard]

This almost the same as the previous post, but not quite.

On August 8th, Anadarko merged with Occidental Petrolium. For every share of APC I received 0.2934 shares of OXY & $59.00

I can understand where you advised the previous poster to use the "split" option, but that would create a net loss on the shares. How do I incorporate the $59 I received per share.

Not sure how to handle this.

Thanks,

Richard

[Mark]

Hi Richard,

The general idea is the same. Use a split to convert the number of shares from the old security to the new one, by using a ratio of <new shares> for <old shares>. Often times the resulting new shares leaves you with a fractional share, which is sold, thus the cash you receive. Is this why you also received $59? If not, why did you receive $59, was this a distribution or return of capital?

[richard]

Mark,

Nothing was fractional.

For each share of APC that I owned, I received 0.2934 shares of OXY and $59. So if I had 100 shares of APC, I would wind up with 29.34 shares of OXY and $5900.

In a 2nd step, the 0.34 shares of OXY would be sold, but this has nothing to do with my question.

If I simply use the split and "rename" the shares this would show a huge loss on that line.

Hope this is clearer.

Thanks,

Richard

[Mark]

Hi Richard,

It sounds like the $59/share is a "Return of Capital". Does this $59/share lower you tax basis? If so, it sounds like a Return of Capital. Just record this as a Return of Capital distribution. This lowers your tax cost basis in the remaining shares. If the $59/share does not lower your tax cost basis, record it as some other type of distribution, like "Other". This will keep your performance accurate. The only difference between a RofC and Other distribution, is the RofC will lower your tax basis.

[richard]

Mark,

Thanks for your response.

Whether my tax basis is lowered, G_d only knows, and I suspect that he doesn't understand the IRS either. Since I live in France, I'm considered a US person living abroad. This gives me a huge deduction on my income taxes, whether or not this applies to the above, I don't know; I just hope my account knows. He is well versed in both US tax law, French tax law, and all the court cases and treaties in between. Yes, I do feel sorry for him.

Richard