BHP Group merged its petroleum-based business with Woodside Energy. Both companies are incorporated in Australia. BHP received Woodside shares in the transaction and distributed those shares to BHP shareholders as a taxable in-specie dividend. (An in-specie dividend is paid in an asset other than cash, in this case WDS shares.) The ticker symbols shown for the companies are the symbols for their ADS shares which trade on the New York Stock Exchange.
WDS ADS shares opened at $21.699 on 1 June 2022, the distribution date.
The prospectus declared no fractional WDS shares would be distributed. Instead, the shares to be received would be rounded DOWN to the nearest whole number. However, this does not apply to the WDS ADS shares traded on the NYSE. Fractional shares were distributed for the ADS shares and sold. Your broker statement should have cash-in-lieu listed for this transaction.
This distribution had full franking rights. This is an Australian tax law item that allows the company to pay any tax for shareholders. For US shareholders it means there should be no foreign tax liability and no foreign tax withheld on the dividend.
Many of the exchange ratios, Fair Market Value and treatment of fractional shares published are for the shares of WDS and BHP listed on the Australian Stock Exchange. These instructions are for the ADS shares of each company traded on the NYSE.
This action will need two entries in the accounting software, a cash dividend received from BHP and a buy transaction for the WDS shares. These instructions will start with designating BHP as an Australian company. This will ensure the dividend will be treated as foreign income for tax reporting. The value of the distribution possibly will not match the 1099 as the value of the WDS shares received, as indicated by BHP and WDS, may differ from the value calculated by your broker. U.S. tax law does not give specific details for determining FMV in such transactions.
Go to Accounting > Securities > Update security settings
Click the edit icon to the left of the BHP name in the list of securities in your portfolio.
Find the Country field in the Advanced section of the BHP settings page.
Use the drop-down menu to choose Australia as the country of incorporation.
Click the Submit button to save the change.
Go to Accounting > Securities > Cash Distribution depending on the version of the software being used. Here is the information you need to complete the dividend entry.
Symbol: BHP
Payout Date: 6/1/2022
Amount: [21.699 x (# of WDS shares received) ] (Round to nearest penny)
# of WDS ADS shares received should correspond to 0.3614 x (# of BHP ADS shares owned) For example, if you owned 100 BHP shares, you should receive 36 WDS shares. This is 0.3614 x 100 = 36.14. Your amount to enter would be 784.20. (21.699 x 36.14) rounded to nearest penny.
Type : Dividend
Ex-Dividend date: 6/1/2022
Save the transaction and the dividend has been entered.
Go to Accounting > Securities > Buy.
Date: 6/1/2022
Select Security : Woodside Energy (WDS)
Number of Shares Bought : 0.3614 x (#of BHP shares owned). (Also see Dividend entry example above.)
Net Total of Purchase: Use the same value as the Amount from the dividend entry above.
If fractional shares were part of the buy transaction and included in the value of the dividend a sell transaction of the fractional share is needed if your statement has cash-in-lieu associated with this transaction.
Go to Accounting > Securities > Sell.
Date: 6/2/2022
Select Security : Woodside Energy (WDS)
Shares Sold : The fractional portion of the shares bought/received
Net Proceeds: Cash-in-lieu amount on broker statement
Go to Accounting > Securities > Update security settings
Click the edit icon to the left of the Woodside name in the list of securities in your portfolio.
Find the Country field in the Advanced section of the WDS settings page.
Use the drop down menu to choose Australia as the country of incorporation.
Click the Submit button to save the change.
Some brokers may have charged a fee related to this transaction. That fee may be entered as an expense paid from the broker account. It would be an investment type expense.
