Fortis (FTS) acquired ITC (ITC) in a cash and stock deal. The steps listed below are based on information we found in the Investor relations area of the Fortis web site.

Resolution:

This merger is a cash plus stock reorganization, which are becoming more and more frequent in recent years. This is a fully taxable merger with cash. For tax purposes this is treated as a sale of ITC for the value of the cash and stock received. Some of the proceeds from the sale (the value of the stock received) is used to purchase Fortis. All the information below is from the information available from the DEFM14A filed with the SEC.

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For Myiclub.com users

Use the Merger with cash security transaction.

• Step 1. Choose ITC (ITC) as the merging company and date the transaction 10/14/16.
• Step 2.  Select the option Transaction is fully taxable. Enter the following additional information:

Cash per share received: 22.57

Exchange ratio:  .752   to 1

Price per share of new shares: 31.03

Reorganization fee:  From your broker statement, if one was charged.

Symbol of new company: FTS

Cash received: Cash-in-lieu amount from broker statement.

Other fields should auto-fill from the information already entered.

Note: In Merger with cash transactions, realized capital gains and the cost basis of the new shares have a component dependent on the price per share entered in the entry screens. In our experience brokers tend to use the price per share published by the companies on their websites in their guidance to shareholders. If the companies publish guidance with a share price, we use that share price in our instructions to minimize possible differences between the accounting records and broker information. In cases where no guidance is available, we will choose the lower of the opening or closing price on the effective date. Either of these prices is acceptable to the IRS and by choosing the lower price some realized capital gains will be deferred to a later date. However, there is always the chance the price we choose will not be the price chosen by your broker. The gain from the merger and cost basis of the new shares recorded in your accounting records will then differ from your broker information. Because of the lack of detail in the tax code, both our choice and your broker’s choice would be reasonable estimates of market value for the shares received. Your records are NOT incorrect because they differ from your broker. Tax return forms do have specific areas to report these usually small differences. Our tax printer software handles these adjustment entries automatically in the normal operation of the software.