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?


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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.
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