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What's the right way to handle the Sprint buyout in Q?

I don't think my download from Ameritrade correctly handled the Sprint buyout. As I understand it, I was given $5.65 in cash and 0.26 shares of new Sprint common stock  for each share of Sprint Nextel I had. Should this be treated as a stock split? The new Sprint uses the same symbol, S, as the prior Sprint Nextel. Should I just rename the stock?
  • Scottrade shows the aquire date on the new shares as the original purchase date?  I am still confused...
  • cvchief:

    That IS correct.  Your holding period for surrendered shares carries over to your new shares, on a lot-by-lot basis.  Likewise some amount (ranging from all to less than all) of your basis carries over, also lot-by-lot.  Read about the income tax consequences of the deal in the prospectus you received that describes in some detail how this transaction is handled.
No, it is not a split. Existing Sprint shareholders will actually own 22% of a Sofbank subsidiary called Starburst II, which actually owns the surviving Sprint.

It worked like this:

Starburst III merges with legacy Sprint, with legacy Sprint being the surviving entity.

Starburst II owns Starburst III, and therefore Sprint. Sofbank owns 78% of Starburst II (through another single-purpose entity called Starburst I), and existing legacy Sprint shareholders own 22%.

Because you received cash in the deal, you should treat the legacy shares as having been sold, with the associated capital gain/loss. Your partial payment in "new" Sprint shares (which are actually Starburst II shares) should be treated as having been acquired on the day of the transaction, with a new cost basis as of that day.
  • Shelquis,
    You should be receiving information from Sofbank/Starburst/Sprint (one of them, I'm unsure as to which) about the "Tax Consequences" of the transaction.  IF you've received that, what did it say?  If you haven't received such, just sit tight until it does.

    Levisncap89 could well be right ... but the "Tax Consequences" section of the paperwork is authoritative.

    {added 7/13} The info is available on Sprint's website, under

I have scanned over the link cited by dbAnalyst and it does not appear to be materially different than other cash+stock merger deals in recent years.  Be warned that I am not a tax expert, CPA, tax attorney, or otherwise professionally qualified to offer tax advice.  As stated throughout the proxy documents, consult your tax advisers!  My comments are not worth much more than what you paid me for them.

For all cases, I would choose to reticker the old Sprint-Nextel (make it something line 'S-old') before creating the new Sprint Corp with S as its ticker.  That helps Quicken (or me) keeps thing straight, IMO.

For those who took a stock for stock option, in Quicken that should be a Corporate Acquisition with Sprint Corp acquiring Sprint-Nextel.  Should not be a big deal.

For those who opted for the cash + stock deal, you may have incurred a capital gain in taking the cash, but you cannot incur a capital loss.  The gain incurred at this time is limited to the cash received.  At this time, I am basing my subsequent numbers and statements on the prices of Sprint Corp (the new Sprint) on 7/11/13.  The average of the high (6.31) and low (5.91) prices in trading that day was $6.11 and I am proceeding with that value.  in combination with the cash received ($5.647658/share) the total value you received was $7.25 per share of Sprint-Nextel.  ($5.647658 + 0.261744048 * 6.11).  Sprint may at some time issue statements with different numbers.  Ultimately, you the taxpayer are responsible for values you use.  There are three possible cases to be addressed:  You bought Sprint Nextel at a high price and are now showing a net loss; you bought Sprint-Nextel for a low price and now have a big gain; or you bought Sprint-Nextel in-between those two prices.  These three cases should be applied to each lot of Sprint-Nextel that you own.  

Bought High:  If your basis in Sprint-Nextel is more than $7.25 / share, you have no cap gains as a result of this transaction.  I would sell all shares in that lot at their basis value (no gain or loss), buy the proper number of Sprint Corp shares for a lesser amount that left the $5.65/share as cash in the account.  I would then do a Remove Shares transaction for those shares just bought followed by an Add Shares transaction for those same shares and same total cost, with the acquisition date reflecting the original acquisition date of the Sprint-Nextel shares.  

Bought Low:  If your basis in the Sprint-Nextel lot is less than $1.60 / share ($6.11 * 0.261744048), the value of the Sprint Corp shares received, you have a capital gain as a result of this transaction limited to the $5.65 cash received.  In Quicken, I would sell the Sprint-Nextel lot for its basis plus the cash received.  Doing so, you will create a cap gains of about $5.65 / share.  Then buy the proper number of shares of Sprint Corp for your prior basis of this lot of Sprint-Nextel.  Your prior basis is transferring to your new holding.  To get the holding periods right, Remove the shares of Sprint Corp just bought and use an Add Shares to add them back in with the same cost basis and the correct (older) acquisition date.  

Bought in-between:  If you your basis in this lot of Sprint-Nextel shares is between 1.60 and 7.25, then part of the cash received is taxable as capital gains.  In Quicken, sell shares of this lot for value received (approx. $7.25 / share).   You capital gain will vary depending on your basis but should be positive and between 0 and 5.65/share of Sprint-Nextel.  Now buy the proper number of shares of Sprint Corp for its value ($6.11 / share, see above) which should leave the $5.65 per share of Sprint-Nextel in your account.  You total basis in Sprint Corp for this lot is less than your basis was in Sprint Nextel for this lot.  Now as above, Remove Shares just bought and Add Shares to get the acquisition date correct.  

When determining the proper number of Sprint Corp shares to Buy and Add, use the full ratio (0.261744048) which will produce fractional shares.  After completing all transactions, sell the fractional shares for whatever you have received as Cash-in-lieu for this transaction.  You will have real capital gains or losses on that sale of the fractional shares.  

Except for some independent confirmation on the Sprint Corp valuation, that should about do it -- or so I believe.
  • OK, I think I've got it, except every time I update my holdings from Ameritrade, I get a Q message that my holdings don't match and offers placeholders to replace my new reduced quantity of S shares with a like number of S-N shares. This makes no sense to me. How do I make it quit this behavior?
  • I've encountered that behavior in the past with similar deals.  If I am remembering correctly (and assuming you're completely confident that you've actually got the correct numbers, needing no adjustment in Quicken) then allow the placeholders to download and then delete the placeholders.  That should stop that from happening.
OK, thank you both, Levisncap89 and dbAnalyst. I think I've got it like Levisncap89 suggested, and I'll watch for any official info (but I've received none so far) that may change that.
  • You didn't receive the proxy statement from Sprint/Nextel?  The link that I provided was to that proxy statement, and the OFFICIAL tax handling is included therein.

  • Thanks dbAnalyst, I had missed the link before, but I've got it now. I've got it but I haven't read it yet. I probably did receive the proxy statement earlier, but I didn't realize that it contained tax treatment info. Thanks.
  • Unfortunately the answer posted by levisncap89 isn't completely correct as it is worded.  Page 162 of the prospectus has the details you need.  It's not a particularly easy transaction to enter in Quicken, depending on your circumstances.
  • Yea, I am getting that. I read that and I get what I got.   I bought a mere 50 number of shares in 2011 in just one purchase with a set basis price for all those shares(One Block) .  They gave me some money and few shares of the new Sprint and then they gave me a small amount of cash for a fractional share.  How do I enter that in quicken?

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