ACE Limited (ACE) acquired Chubb (CB) in a cash and stock deal. ACE decided to have the merged company operate using the Chubb name and ticker symbol.
The SEC filing for this merger can be found at through the (new) Chubb web site at:
https://d1lge852tjjqow.cloudfront.net/CIK-0000896159/f4dc9a2d-f9ad-4390-bc06-7d1fa75712ec.pdf This link will open an HTML version of the S-4/A filing.
Resolution:
This merger is a cash plus stock reorganization, which is a fully taxable merger with cash. For tax purposes this is treated as a sale of (old) Chubb for the value of the cash and stock received. Some of the proceeds from the proceeds (the value of the stock received) is used to purchase (new) Chubb. All the information below is from the information available from the S-4/A filed with the SEC. Since the new company used an existing ticker symbol, the first step will be to change the ticker for Chubb, in your club records.
Ticker Symbol Change
The Merger
Use the “Merger with cash” transaction.
Enter the following additional information:
Other field should auto-fill from the information already entered.
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 chosen 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. These prices are 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 and cost basis recorded in your accounting records will then differ from your broker information. Because of the lack of detail in the tax code, both choices 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.
