Mergers & Acquisitions
As explained on the "cash to boot" page of this website, mergers between corporations sometimes are paid for with a combination of stock and cash, which provides a unique accounting challenge. The general tax rule is that you must pay capital gains tax on such a transaction, but only to the extent of "cash to boot" which is the amount of cash you actually received. (It's technically called a Section 368 reorg.)
In some cases, such as Fording Canadian and the Wyeth merger with Pfizer, the merger consideration is fully taxable--your sales proceeds include both the cash received and the market value of the new stock.
In other cases, such as the Schering-Plough merger with Merck, the cash portion is treated as a redemption (unless you already owned shares in Merck.) If you owned Merck already, you have to run tests set forth in Section 302 of the Internal Revenue Code to determine if you meet the requirements to be eligible to treat the cash portion of the merger proceeds as a redemption rather than a dividend. Don't worry, we can help. Just use our Calculator for Section 302 Tests. Our handy calculator tool will help you deal with your accounting nightmare! Use our special BNSF calculator for the unusual dual exchange ratios involved in the prorated stock election for the merger of Burlington Northern Santa Fe Corp into Berkshire Hathaway Inc. Because the stock election was oversubscribed, everyone who made this election received cash to boot. Click on the picture of the
BNSF train engine to access the calculator. Our regular "cash to boot" calculator has pre-filled data ready for many recent corporate merger transactions which had stock with "cash to boot" such as: Alcon (by Novartis) Medco (by Express Scripts) Nicor (by AGL) Marvel (by Disney) Schering-Plough (by Merck) Sterling Financial (by PNC) Wyeth (by Pfizer)
Click on the picture of the boot to access the calculator.
In some cases, such as Fording Canadian and the Wyeth merger with Pfizer, the merger consideration is fully taxable--your sales proceeds include both the cash received and the market value of the new stock.
In other cases, such as the Schering-Plough merger with Merck, the cash portion is treated as a redemption (unless you already owned shares in Merck.) If you owned Merck already, you have to run tests set forth in Section 302 of the Internal Revenue Code to determine if you meet the requirements to be eligible to treat the cash portion of the merger proceeds as a redemption rather than a dividend. Don't worry, we can help. Just use our Calculator for Section 302 Tests. Our handy calculator tool will help you deal with your accounting nightmare! Use our special BNSF calculator for the unusual dual exchange ratios involved in the prorated stock election for the merger of Burlington Northern Santa Fe Corp into Berkshire Hathaway Inc. Because the stock election was oversubscribed, everyone who made this election received cash to boot. Click on the picture of the
BNSF train engine to access the calculator. Our regular "cash to boot" calculator has pre-filled data ready for many recent corporate merger transactions which had stock with "cash to boot" such as: Alcon (by Novartis) Medco (by Express Scripts) Nicor (by AGL) Marvel (by Disney) Schering-Plough (by Merck) Sterling Financial (by PNC) Wyeth (by Pfizer)
Click on the picture of the boot to access the calculator.