Calculating cost basis of Express Scripts in Cigna merger

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Loon11
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Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Wed Jan 30, 2019 10:50 pm

I've spent all day trying to come up with my cost basis for the sale of express scripts that I owned. I was a shareholder of Merck way back - original stock purchased thru DRP program 9/97. In 2003 Merck spun off Medco and I ended up with shares of Medco. Unfortunately, I have lost most of my DRP records for Merck as I sold it in 2004 at a loss. But I had approx 79 shares of Merck at the time of the spin off(date of spinoff 8-20-03) so I figure I got about 9 +/- shares of Medco. researching on the internet, found out that Medco had a share price of 23.10 when it spun off, giving me a cost basis of around $208.
Later, Medco merged or became express scripts - cannot find of my records for medco but know I ended up with 14 shares of express scripts in my vanguard brokerage account in 5/2012.
Never received anything from either Cigna or Vanguard but saw my account on line where I no longer owned express scripts but had CI (cigna) there.
I called Vanguard and they said it was a corporate merger and they knew nothing. Read on the internet that shareholders of ESRX received $48.75 per share plus 0.2434 of the new Cigna for each share of ESRX. So now I have 3 shares of CI and have to deal with tracking the trail of cost basis of the $760.82 I received in cash. Does it make sense that my cost basis for ESRX is $208 and original date of ownership 9/1997? that's what my research has lead me to believe but I am not sure. So I pay gain on the difference in 208 and 761? Its so confusing and I imagine I could put anything down and challenge the IRS to figure it out! So far about 5 hrs of trying and still unsure. I got 48.75 x 14 = 682.50 plus $78.09 for 0.4 shares of CI (selling at $195 on day of sale I assume). Any cost basis experts out there? I thought back in the 90's buying DRPs was a smart move but I'll never be able to sell them - it will drive me crazy trying to figure the cost basis. More efficient to just leave them to my son.

mcraepat9
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by mcraepat9 » Wed Jan 30, 2019 11:04 pm

Netbasis.com

Handles DRIPs and spinoffs/mergers other corporate events

Will cost you something - $25 I think
Amateur investors are not cool-headed logicians.

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Loon11
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Wed Jan 30, 2019 11:16 pm

will check it out - Thanks - I'm thinking it might be difficult without some of my records but will see if they can help. appreciate it

increment
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by increment » Wed Jan 30, 2019 11:59 pm

Loon11 wrote:
Wed Jan 30, 2019 10:50 pm
In 2003 Merck spun off Medco and I ended up with shares of Medco. Unfortunately, I have lost most of my DRP records for Merck as I sold it in 2004 at a loss. But I had approx 79 shares of Merck at the time of the spin off(date of spinoff 8-20-03) so I figure I got about 9 +/- shares of Medco. researching on the internet, found out that Medco had a share price of 23.10 when it spun off, giving me a cost basis of around $208.
According to my notes, they gave out 0.1206 shares of Medco for each existing share of Merck. The cost basis of the Medco shares given out should have been 5.35% of the old Merck basis. (The cost basis of the post-spinoff Merck shares would be reduced by the same 5.35%.)
Later, Medco merged or became express scripts - cannot find of my records for medco but know I ended up with 14 shares of express scripts in my vanguard brokerage account in 5/2012.
In this transaction, each share of Medco turned into 0.81 shares of Express Scripts plus $28.80 in cash.

At that time, the price of Express Scripts was $56.49. The value of "total consideration" received per Medco share was (0.81 * $56.49) + $28.80 = $74.5569.

At that time (tax year 2012) you should have reported a taxable gain in the amount of: the lesser of (a) the actual cash received (i.e., $28.80 per Medco share) and (b) the total consideration (i.e., $74.5569 per Medco share) less the Medco cost basis.

Also, the cost basis for the Express Scripts given (i.e., 0.81 shares for each Medco share) would be the Medco cost basis less the cash received (i.e., $28.80 per Medco share) plus the taxable gain calculated in the previous paragraph.
Never received anything from either Cigna or Vanguard
Apparently we are supposed to work this out from the merger proxy document (see page 195, "MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES"), which they certainly did send out, and the Form 8937 ("Report of Organizational Actions Affecting Basis of Securities") posted on Cigna's website.
Does it make sense that my cost basis for ESRX is $208 and original date of ownership 9/1997?
No, and the acquisition dates would be whenever you purchased Merck in the first place. I have not yet seriously attempted to understand the two Cigna documents but possibly all the cash received last year would be treated like a dividend, not a stock sale.

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by typical.investor » Thu Jan 31, 2019 3:57 am

Loon11 wrote:
Wed Jan 30, 2019 10:50 pm
I've spent all day trying to come up with my cost basis for the sale of express scripts that I owned. I was a shareholder of Merck way back - original stock purchased thru DRP program 9/97. In 2003 Merck spun off Medco and I ended up with shares of Medco. Unfortunately, I have lost most of my DRP records for Merck as I sold it in 2004 at a loss. But I had approx 79 shares of Merck at the time of the spin off(date of spinoff 8-20-03) so I figure I got about 9 +/- shares of Medco. researching on the internet, found out that Medco had a share price of 23.10 when it spun off, giving me a cost basis of around $208.
Later, Medco merged or became express scripts - cannot find of my records for medco but know I ended up with 14 shares of express scripts in my vanguard brokerage account in 5/2012.
Never received anything from either Cigna or Vanguard but saw my account on line where I no longer owned express scripts but had CI (cigna) there.
I called Vanguard and they said it was a corporate merger and they knew nothing. Read on the internet that shareholders of ESRX received $48.75 per share plus 0.2434 of the new Cigna for each share of ESRX. So now I have 3 shares of CI and have to deal with tracking the trail of cost basis of the $760.82 I received in cash. Does it make sense that my cost basis for ESRX is $208 and original date of ownership 9/1997? that's what my research has lead me to believe but I am not sure. So I pay gain on the difference in 208 and 761? Its so confusing and I imagine I could put anything down and challenge the IRS to figure it out! So far about 5 hrs of trying and still unsure. I got 48.75 x 14 = 682.50 plus $78.09 for 0.4 shares of CI (selling at $195 on day of sale I assume). Any cost basis experts out there? I thought back in the 90's buying DRPs was a smart move but I'll never be able to sell them - it will drive me crazy trying to figure the cost basis. More efficient to just leave them to my son.
Assuming distribution reinvestment, I guesstimate your cost basis in CI is $79.04.

I estimate you bought about 35 shares of MRK 9/97 which gives you 79.8575 to sell sometime in 2004. Wasn't sure about the exact dates. Anyway, this info is for reference only. Someone chided Schwab about not being a full service broker (for not doing specID with mutual funds online), but this is from them.

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Loon11
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Thu Jan 31, 2019 9:17 am

Wow - typical.investor, you have really nailed it! So close - I actually do have the initial drp purchase record - I only bought 6.987 shares on 9-5-97 and turned around and purchased 7 more shares on 1-30-98, giving me 18.7, then another purchase on 01/99, then the split. I think you are on the money with it. I did sell it on 10-26-04, market value $31.26/share for 82.135 shares or $2555.15 according to the last statement I have. I am contacting cigna today because I really did not receive any paperwork from them or anyone regarding the merger.
Do you have any idea how to report it as dividends? the only thing I have is the brokerage form for my vanguard account with 682.50 is listed as a sale on 1099-B with $78.09 as the CI partial share cash.
Thanks so much for all this - will f/u with cigna and your links but if you have a clue where to report it, appreciate your help.

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Loon11
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Thu Jan 31, 2019 9:32 am

just called Cigna and was told to call ESRX and that person said "can't help you - should be on your brokerage" and they don't have anything. I will wait and see what you do ! Wonder how to put this in TurboTax - may end up with your figures. Have you used netbasis.com?

increment
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by increment » Thu Jan 31, 2019 11:38 am

Any basis you have in Express Scripts or Cigna today would be the result of the August 2003 5.35% reduction in Merck basis. Did you acknowledge that adjustment when you reported the your 2004 sale of Merck?

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Loon11
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Thu Jan 31, 2019 5:05 pm

probably not - will check. I think back then I just used what I paid versus the sale price.

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by typical.investor » Thu Jan 31, 2019 8:28 pm

Loon11 wrote:
Thu Jan 31, 2019 9:17 am
Wow - typical.investor, you have really nailed it! So close - I actually do have the initial drp purchase record - I only bought 6.987 shares on 9-5-97 and turned around and purchased 7 more shares on 1-30-98, giving me 18.7, then another purchase on 01/99, then the split. I think you are on the money with it. I did sell it on 10-26-04, market value $31.26/share for 82.135 shares or $2555.15 according to the last statement I have. I am contacting cigna today because I really did not receive any paperwork from them or anyone regarding the merger.
Do you have any idea how to report it as dividends? the only thing I have is the brokerage form for my vanguard account with 682.50 is listed as a sale on 1099-B with $78.09 as the CI partial share cash.
Thanks so much for all this - will f/u with cigna and your links but if you have a clue where to report it, appreciate your help.
Do you mean what’s the cost basis without dividend reinvestment?

I’ll run it again with your updated info without dividends reinvested. Is that correct?

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Loon11
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Thu Jan 31, 2019 8:32 pm

no - dividends were invested in the DRIP plan. Thanks!

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Thu Jan 31, 2019 9:51 pm

not sure about the dividend reinvestment part but after reading the Cigna instructions regarding tax treatment, etc, its more confusing than ever. The bottom line of those "instructions" for the most part said to consult a tax accountant. In any event, I will need to complete some form or other when I get to it in Turbo. Vanguard has it as proceeds from a sale and I'm hoping to avoid treating it as all gain. Really appreciate your input!

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by munemaker » Thu Jan 31, 2019 10:13 pm

This article explains how to calculate the cost basis as a result of the merger. You have to create a free account to read the article.

https://www.aaii.com/journal/article/th ... 70fe3979c0

The cash payment from the merger is 100% taxable with no basis. The cash payment does not factor into the basis calculation.

As far as calculating your basis irrespective of the merger, obviously you need records of the purchases, including the dividend reinvestments.

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by typical.investor » Fri Feb 01, 2019 3:49 am

Loon11 wrote:
Thu Jan 31, 2019 9:17 am
Do you have any idea how to report it as dividends? the only thing I have is the brokerage form for my vanguard account with 682.50 is listed as a sale on 1099-B with $78.09 as the CI partial share cash.
Thanks so much for all this - will f/u with cigna and your links but if you have a clue where to report it, appreciate your help.
I updated it per your transactions. It needed 21.427 shares purchased on 1/99 or you wouldn't have 82.135 shares for sale on 10/24/04. 21.426 or fewer didn't work.

As far as I know, your basis is $426.11. Not sure 100% how to allocate that between the $682.50 and $78.09, but I think the $78.09 is a sale that goes on Schedule D.

For example, see https://www.fool.com/knowledge-center/h ... ule-d.aspx

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Loon11
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Fri Feb 01, 2019 8:46 am

perfect! I did make a few more small purchases to account for the extra 21 so I'm sure its right, plus dividend reimbursement added fractional shares.
The 78.09 - that is the cash for the fractional share of the merger - representing the 3.4 shares (78.09 was the 0.4 shares of CI). \Do you know if the whole thing is treated as a sale and that's my basis? If so, that ought to be fairly straightforward. You are a genius! Thank you so much. Are you saying that the $78.09 needs to be on a different form?

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Fri Feb 01, 2019 1:16 pm

typical investor: Just read the "fool" article regarding fractional shares and reporting on Sch D. Thank you!. The rest of the calculations are great - the only thing a tiny bit off is my statement from the sale shows gross sale 2560.97, 5.00 service charge, share price 31.18, proceeds 2555.15 for 82.135 shares sold.
On the CI stock that I received as a result, I actually received 3.4 shares rather than 3.7. would that affect the cost basis since its just the fractional share? the cash sale would be a bit higher than 78.09 in that case. In any event, its so close that I will use the cost basis you calculated - doubt it could be off much at all. Thank you again -

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Fri Feb 01, 2019 1:26 pm

do you know if the fractional sale is considered long term or short term? I

libralibra
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by libralibra » Fri Feb 01, 2019 6:16 pm

You must have already calculated your basis at least twice before, right? Do you have your tax returns from 2004 and 2012? The CI merger will look very similar to the ESRX merger you reported in 2012.

In a stock and cash merger, typically if your basis is low enough (below the value of the new shares received), you would just report the cash received as all profit (0 basis). The new shares would then inherit the basis of the old shares, and you use this basis if there are any fractional shares sold, or when you sell the new shares.

Assuming you reported the MRK sale correctly, take the basis you used in 2004 and multiply by 5.35/94.65. That's the basis for your MHS shares. Then look at your 2003 tax return and subtract the basis you used for the fractional share of MHS sold. Also look at your 2012 return and subtract the basis you used for the fractional share of ESRX sold. This is the basis for the 3.4 CI shares that you received. Your holding period would be LT.

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Loon11
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Fri Feb 01, 2019 9:51 pm

librallibra - not sure I'm understanding what you mean. I did look up those tax records and see that in 2012 I sold medco for $518.40 with 329.50 basis, 0.58 of ESRX with 0 basis. in 2004, sold merck at a loss with basis of 4505. that's what I found from my turbotax records. The value of the 3 shares of CI is 582 right now, the 0.4 fractional share was 78.09 cash. The cash in lieu of the 14 shares of esrx was 682.50. I was just trying to determine how to report the 682.50's basis and the 78.09 cash for the fractional share.

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by libralibra » Sat Feb 02, 2019 1:18 am

Loon11 wrote:
Fri Feb 01, 2019 9:51 pm
librallibra - not sure I'm understanding what you mean. I did look up those tax records and see that in 2012 I sold medco for $518.40 with 329.50 basis, 0.58 of ESRX with 0 basis. in 2004, sold merck at a loss with basis of 4505. that's what I found from my turbotax records. The value of the 3 shares of CI is 582 right now, the 0.4 fractional share was 78.09 cash. The cash in lieu of the 14 shares of esrx was 682.50. I was just trying to determine how to report the 682.50's basis and the 78.09 cash for the fractional share.
I mean the 518.40 back in 2012 and the 682.50 in 2018 should both be reported with 0 basis.

The cost basis of CI = the basis of ESRX = the basis of medco = 5.35% of your cost basis for MRK, adjusted for the fractional shares that were sold along the way.

As a first order approximation, if we ignore the fractional shares, that would be 4505.00 * 5.35/94.65 = 254.64 (assuming no new MRK shares were bought/sold between the spinoff in 2003 and your sale in 2004) for 3.4 shares CI. So the basis for .4 shares is 29.96.

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by increment » Sat Feb 02, 2019 1:28 am

But not if you failed to reduce your (pre-Medco) Merck basis by 5.35% to account for the 2003 Medco spinoff. (Perhaps that's what is meant by "I think back then I just used what I paid" for the Merck basis as 2004?)

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Sat Feb 02, 2019 2:24 pm

did not reduce the basis by 5.35% that I can find. How would that affect the basis? From your post, the entire $682.50 (representing the cash paid for the 14 shares of ESRX) is fully taxable as long term dividends or ordinary income? the $78.09 fractional share has a basis of 29.96? these are reported on schedule D or whereever Turbo directs me? Thank you.

Had I known this was going to occur, I certainly would have sold the ESRX to preclude t his whole situation - never received any notification.

libralibra
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by libralibra » Sat Feb 02, 2019 8:48 pm

It does not affect the basis of your 682.50. That is still 0.

It also only makes a tiny difference in your .4 CI shares cost basis. If the 4505.00 was what you paid for all the shares of MRK which contributed to the medco spinoff, then take 5.35% of that to get your medco basis. (Then subtract the amount attributed to the fractional shares of medco and ESRX sold, if you can.) And finally multiple by 0.4/3.4. It'll be a couple of dollars less than 29.96.

Both should be reported on Sch D as long term gains.

btw, if you had sold the ESRX pre-merger, say for $100 a share, you would have had to pay taxes on about $400 more and still have gone thru this calculation. For now, keep track of the remaining cost basis for your 3 shares CI if you ever do sell.

The spinoff looks like it was wildly successful. It has made back all of the 1700 you lost on the MRK and more.

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Loon11
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Sat Feb 02, 2019 11:21 pm

Thanks Librallibra. Will use 28.35 for basis for CI partial share using your calculations and what I had for basis for mrk (4505). Somehow I had a basis of 329.50 for the medco stocks that I sold so I was off. Using 5.35% of 4505 = 241 minus 0, x 0.4 = 96.40/3.4 = 28.35. does that sound right? does that mean a whole share cost basis for CI would be $113.40? so sorry for all the questions -

And thanks for the info re selling esrx - I just tend to let these DRPs sit and not look at them but will certainly try to make a note of the basis of CI since you have given me what it is (or very close).

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by libralibra » Sun Feb 03, 2019 1:44 am

That's a good guess anyway, based on the numbers you have given. The total remaining basis for all 3 shares CI is 241 minus 28.35.

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Loon11
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Sun Feb 03, 2019 10:12 pm

Thank you Librallibra - I'm going with it!!

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by retired_tom » Wed Feb 13, 2019 1:05 pm

I'm not sure if I can add on to this post, or if I should have started a new one. I too, am caught up in this ESRX/CI merger, trying to figure out my cost basis.
I'm hoping that this is somewhat simple. I went through the Medco/Express Scripts merger in 2012, paying the capital gains on the proceeds. My question is that after the MHS/ESRX merger, I ended up with 700.773 shares of ESRX. Based on what I read at the time on their 8937, the FMV of ESRX was listed as $56.49 / sh, with $53.59 / frac. sh. I'm assuming that $39,584.43 is my cost basis of the ESRX shares to use for this merger.
I know it says to consult my tax advisor, but I don't have one. Do I really need to go out and hire a tax advisor just to figure out this one transaction?

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by increment » Wed Feb 13, 2019 6:30 pm

retired_tom wrote:
Wed Feb 13, 2019 1:05 pm
I went through the Medco/Express Scripts merger in 2012, paying the capital gains on the proceeds.
You should have received both cash and Express Scripts stock. Did you calculate your proceeds based on the value of the cash plus the value of Express Scripts received?
My question is that after the MHS/ESRX merger, I ended up with 700.773 shares of ESRX. Based on what I read at the time on their 8937, the FMV of ESRX was listed as $56.49 / sh, with $53.59 / frac. sh. I'm assuming that $39,584.43 is my cost basis of the ESRX shares to use for this merger.
That would not make any sense unless you calculated your 2012 capital gain by including the value of the Express Scripts shares received. You were not required to do so. As I understand it, in the typical case you would have paid tax on the entire amount of cash received, and your Medco basis would have carried over to your new Express Scripts holding(s) (after an appropriate adjustment because they issue whole numbers of shares and cash for any fractional part left over). In this case, the particular 2012 value of Express Scripts does not matter for the basis of your Express Scripts shares.

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by retired_tom » Thu Feb 14, 2019 8:14 am

I'm embarrassed to say this. Looking back at my 2012 tax return, I didn't follow the instructions on the merger at all. I just used the 1099-B that I received, and put in all in the Schedule D as a sale. Worse yet, the 1099-B had a number of shares that all were listed with a cost basis of $0. I just used their numbers and paid the tax on a little over $22,000 capital gain. So, since it's all screwed up, what is my cost basis for my ESRX hares?

increment
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by increment » Thu Feb 14, 2019 9:59 am

retired_tom wrote:
Thu Feb 14, 2019 8:14 am
I'm embarrassed to say this. Looking back at my 2012 tax return, I didn't follow the instructions on the merger at all. I just used the 1099-B that I received, and put in all in the Schedule D as a sale. Worse yet, the 1099-B had a number of shares that all were listed with a cost basis of $0. I just used their numbers and paid the tax on a little over $22,000 capital gain. So, since it's all screwed up, what is my cost basis for my ESRX hares?
Wait, I think that what you did was correct for 2012, unless the 2012 value of ESRX that you received was less than the basis of Medco (MHS) that you surrendered. $22000 would have been the amount of cash that they gave out ($28.80 per MHS share surrendered), along with the ESRX stock. (The 1099-B has no leeway to explain what happened in detail.) In this case, your MHS basis carries over to ESRX, 0.81 shares per MHS share surrendered. (Then you need to adjust because they don't give out fractional shares, but rather whole numbers of shares plus "cash in lieu".)

Therefore, the big question for you, as it was for the original poster, is "What was your Medco basis?"

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by retired_tom » Thu Feb 14, 2019 11:08 am

Well, that's going to be a problem since I have no idea what my cost basis was for the Medco shares are. I can't really remember that far back, 2004, but I do remember that when I first got into the ESPP, I think Schwab was handling it, then someone else took over, then Fidelity finally ended up with it. Along there was a split of 2 for 1, or maybe it was 3 for 1, again, I don't remember. I don't have any records that go back that far. I did keep all my records from the time I started receiving Express Scripts shares, which would be 2012.
Okay, I think I'm starting to figure this out. I have the first statement from Fidelity that shows the exchange of Medco to Express Scripts, and on there it showed a cost basis for the 700.773 ESRX shares of $32,144.00. I'm assuming that is my cost basis for that lot of shares, which were the converted shares. Subsequent purchases of ESRX I have records with the cost basis for each lot.
Now, before I get lost again when Cigna decides to merge in the future, my statement from the conversion of ESRX to CI shows a cost basis for the Cigna shares as well. I would assume that would be my cost basis going forward.

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Loon11
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Fri Feb 15, 2019 6:59 pm

does anyone know what the date acquired for express scripts and CI would be? The date the first merck share or when esrx was rec'd from the knock off. Would CI acquisition date be the date one received express scripts or merck? I will probably put 2012 into turbo - don't see that it makes a big difference since they are both long term unless I am missing something.

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by increment » Sat Feb 16, 2019 1:06 am

Loon11 wrote:
Fri Feb 15, 2019 6:59 pm
does anyone know what the date acquired for express scripts and CI would be? The date the first merck share or when esrx was rec'd from the knock off. Would CI acquisition date be the date one received express scripts or merck?
The acquisition date carries over from the company from which each was spun off, so in your case the dates would go back to your Merck purchases. Because you had dividend reinvestment, you have multiple lots, each with its own acquisition date. Fortunately, for the purposes of reporting the capital gain, the IRS lets you consolidate all the lots you transacted (at the same time) into one line with the acquisition date of "various". (I don't know what your particular tax software allows. Don't most let you import the 1099-B information without the need for you to enter data directly?)

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Loon11
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by Loon11 » Sat Feb 16, 2019 12:48 pm

great. will put various. I had started to do that but thought that might not fly with IRS. Thanks again.

retired_tom
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by retired_tom » Wed Mar 06, 2019 8:12 am

I hate to bring this up again, but I am so confused. I received the 1099-B from Fidelity. The numbers make no sense. I was finally able to figure out what they did for the proceeds, but for the life of me, I can't figure out how they came up with the cost basis. Taking one line, or actually 2 lines: (116 total lines = 58 lots)

Code: Select all

ACTION    QUANTITY    DATE ACQUIRED     DATE SOLD      PROCEEDS      COST BASIS      GAIN/LOSS
MERGER     5.4539       04/30/15        12/24/18       $262.01        $203.57         $58.44
SALE       0            04/30/15        12/24/18         $3.87          $3.42          $0.45
I finally figured out that they came up with the Merger proceeds ($262.01) as the cash received ($48.75-1.45%=$48.04) times the quantity, and the Sale proceeds ($3.87) as the 1.45% ($0.71) times the Merger quantity. In the end, the total Proceeds adds up to the total cash I received.

I have no idea how they came up with the cost basis. If I pull my records for that lot, I show that I purchased those shares at $82.08/share for a total cost of $447.66. Can anyone help figure out how they came up with the cost basis?

I don't think the 1099 gives me any information, other than the total cash received, which per the 8937 says I can pay taxes on with a cost basis of zero, or the total proceeds (cash received + CI FMV shares received - ESRX cost basis), whichever is less.

I spent the whole day trying to figure this out yesterday. I come up with 3 different totals, with the 1099 totals right in about the middle of all the different totals I came up with.

How do I report this on Form 8949? Just the Merger line? Combine, the Merger line with the Sale line as one transaction? Can I just say the heck with it, and use the bottom line totals?

I appreciate any help.

typical.investor
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by typical.investor » Wed Mar 06, 2019 8:51 am

retired_tom wrote:
Wed Mar 06, 2019 8:12 am
I hate to bring this up again, but I am so confused. I received the 1099-B from Fidelity. The numbers make no sense. I was finally able to figure out what they did for the proceeds, but for the life of me, I can't figure out how they came up with the cost basis. Taking one line, or actually 2 lines: (116 total lines = 58 lots)

Code: Select all

ACTION    QUANTITY    DATE ACQUIRED     DATE SOLD      PROCEEDS      COST BASIS      GAIN/LOSS
MERGER     5.4539       04/30/15        12/24/18       $262.01        $203.57         $58.44
SALE       0            04/30/15        12/24/18         $3.87          $3.42          $0.45
I finally figured out that they came up with the Merger proceeds ($262.01) as the cash received ($48.75-1.45%=$48.04) times the quantity, and the Sale proceeds ($3.87) as the 1.45% ($0.71) times the Merger quantity. In the end, the total Proceeds adds up to the total cash I received.

I have no idea how they came up with the cost basis. If I pull my records for that lot, I show that I purchased those shares at $82.08/share for a total cost of $447.66. Can anyone help figure out how they came up with the cost basis?

I don't think the 1099 gives me any information, other than the total cash received, which per the 8937 says I can pay taxes on with a cost basis of zero, or the total proceeds (cash received + CI FMV shares received - ESRX cost basis), whichever is less.

I spent the whole day trying to figure this out yesterday. I come up with 3 different totals, with the 1099 totals right in about the middle of all the different totals I came up with.

How do I report this on Form 8949? Just the Merger line? Combine, the Merger line with the Sale line as one transaction? Can I just say the heck with it, and use the bottom line totals?

I appreciate any help.
Do you know the dates and amounts of the MRK you purchased?

Were dividends reinvested?

Do you know the dates and amounts sold?

If you bought MRK once and sold everything at the same time, it’s easy to run an analysis like seen earlier in the thread (dividend reinvestment too).

retired_tom
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by retired_tom » Wed Mar 06, 2019 9:30 am

I never had MRK. I bought MHS, while working there, which got converted to ESRX in 2012, but the one listed above was a pure ESRX purchase through the company ESPP . MHS never distributed dividends. They did do a 2 for 1 stock split in 2008.
I've never sold any shares of MHS or ESRX.
Fidelity sent me two 1099's. One for the uncovered shares from 2004 to 2010, the other covered shares from 2011 to 2015. I have no formal records from the uncovered shares, other than what I recorded in Quicken at that time, and I went through this same exercise in 2012 when MHS was acquired by ESRX. At that time, they sent out an easy to understand letter that explained what to do and how to do it, and showed examples of the calculations. It also explained how to determine the cost basis of the new shares of ESRX stock received. That would have been the 700 ESRX shares that were were converted from the MHS shares. I do have my 2012 Fidelity statement that shows a cost basis for those 700 shares, so I'm assuming that I can use that for the uncovered shares cost basis.
Quite a few of the 2004-2006 transactions list the cost basis of $0 on the 1099. I can go back in Quicken and pull up the actual cost basis, but I still don't think any of that is going to match up with the 1099.
If I just copied all the numbers from the 1099 to the 8949, and used Fidelity's numbers, the IRS is OK with that? If I figure just the cash, it's like $50k LTCG, if I use the numbers that I have in Quicken and the 2012 Fidelity statement, it's like a $40k LTCG, and if I just use the 1099 from Fidelity, it's like $44k LTCG.

Actually, thinking and writing this all out, I realized I do have all the data I need in Quicken. I just put a spreadsheet together starting in 2004, and listed shares and cost, another column when the 2 for 1 stock split happened, and a third column for the ESRX merger. Doing all the calculations on the shares, 2 for 1, and the .81 conversion for the ESRX merger, the numbers come out exactly as the 1099 shows share wise. Now, all I have to do is work on the calculations for the share prices over the different time frames. I'll go dig up the old MHS 8937 and instructions sheet that Medco/Express Scripts sent out.

I'm still wondering how the 2 lines figure in, Merger/Sale, and how it's reported on the 8949.

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munemaker
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by munemaker » Wed Mar 06, 2019 11:07 am

retired_tom wrote:
Wed Mar 06, 2019 8:12 am

Code: Select all

ACTION    QUANTITY    DATE ACQUIRED     DATE SOLD      PROCEEDS      COST BASIS      GAIN/LOSS
MERGER     5.4539       04/30/15        12/24/18       $262.01        $203.57         $58.44
SALE       0            04/30/15        12/24/18         $3.87          $3.42          $0.45
How do I report this on Form 8949? Just the Merger line? Combine, the Merger line with the Sale line as one transaction? Can I just say the heck with it, and use the bottom line totals?
It seems obvious to me that you would report each of the two lines separately as long term capital gains on form 8949. Am I missing something?

increment
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by increment » Wed Mar 06, 2019 1:09 pm

retired_tom wrote:
Wed Mar 06, 2019 8:12 am
per the 8937 says I can pay taxes on with a cost basis of zero, or the total proceeds (cash received + CI FMV shares received [) minus] ESRX cost basis
I don't have a conclusion for you, but I see the following:

You said that your ESRX basis for the April 2015 lot was $82.08/share. The total proceeds received in December 2018 was around $93 per ESRX share surrendered (i.e., $48.75 + 0.2434 Cigna share), so you want to treat this lot using the second formula (because $93 - $82.08 < $48.75).

Adding up the two quoted lines for the April 2015 lot, they claim that you should recognize income of $10.798 per ESRX share surrendered. That would seem to value the 0.2434 Cigna share at $44.128 (= $82.08 + $10.798 - $48.75), i.e., a Cigna price of $181.30. That suspiciously was the closing price of Cigna on December 21, 2018 (the last trading day before December 24, the date cited on the 1099-B).

Could that be a figure that Fidelity is using?

retired_tom
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by retired_tom » Wed Mar 06, 2019 2:03 pm

munemaker wrote:
Wed Mar 06, 2019 11:07 am
retired_tom wrote:
Wed Mar 06, 2019 8:12 am

Code: Select all

ACTION    QUANTITY    DATE ACQUIRED     DATE SOLD      PROCEEDS      COST BASIS      GAIN/LOSS
MERGER     5.4539       04/30/15        12/24/18       $262.01        $203.57         $58.44
SALE       0            04/30/15        12/24/18         $3.87          $3.42          $0.45
How do I report this on Form 8949? Just the Merger line? Combine, the Merger line with the Sale line as one transaction? Can I just say the heck with it, and use the bottom line totals?
It seems obvious to me that you would report each of the two lines separately as long term capital gains on form 8949. Am I missing something?
Well, all of the Sale lines are zero quantity. Besides that, quite a few of them are like you see above, Gain/Loss - $0.45, which rounds down to zero, but if that what I need to do.
Thanks.

retired_tom
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by retired_tom » Wed Mar 06, 2019 2:17 pm

increment wrote:
Wed Mar 06, 2019 1:09 pm
retired_tom wrote:
Wed Mar 06, 2019 8:12 am
per the 8937 says I can pay taxes on with a cost basis of zero, or the total proceeds (cash received + CI FMV shares received [) minus] ESRX cost basis
I don't have a conclusion for you, but I see the following:

You said that your ESRX basis for the April 2015 lot was $82.08/share. The total proceeds received in December 2018 was around $93 per ESRX share surrendered (i.e., $48.75 + 0.2434 Cigna share), so you want to treat this lot using the second formula (because $93 - $82.08 < $48.75).

Adding up the two quoted lines for the April 2015 lot, they claim that you should recognize income of $10.798 per ESRX share surrendered. That would seem to value the 0.2434 Cigna share at $44.128 (= $82.08 + $10.798 - $48.75), i.e., a Cigna price of $181.30. That suspiciously was the closing price of Cigna on December 21, 2018 (the last trading day before December 24, the date cited on the 1099-B).

Could that be a figure that Fidelity is using?
It very well can be. I just finished the Excel spreadsheet from day 1 of purchasing Medco stock in 2004, and continuing on through 2015, when I retired. Then I found all the instructions that Medco/Express Scripts sent out in 2012 on how to figure the CG on the merger as well as figuring the new cost basis of ESRX shares. That completed, I then followed the same instructions in regard to the Cigna merger. Funny thing is, I came within $200 of the gain that Fidelity came up with. They have a lot stranger numbers than I came up with, but the bottom lines come out within $200 of my spreadsheet. I think I know where the difference is. According to their ESRX/CI merger documents they were using a $179.80 FMV value, which falls within the open/close numbers for 12/24. I guess I'll just go with it, and start writing the check.
Thanks for all the help.

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teen persuasion
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by teen persuasion » Mon Mar 18, 2019 9:10 am

Posting to follow - my 88 yo father has this issue, too. My parents have already filed their taxes (with my sister's help - they don't do computers :shock: ), and received the 1099 afterwards. They'd thought this would go on their 2019 taxes.

When I tried to ask about his basis, he insisted "they" just gave him the stock, he never bought it. I knew it had to be a merger/acquisition situation, but couldn't make sense of it. Reading this thread, it's getting clearer - I know dad had Merck decades ago, he may still...

Need to talk with them again to ferret out details before trying to reconstruct numbers for him. Did I mention that they don't do computers? :oops:

cpl3408
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by cpl3408 » Fri Mar 22, 2019 7:53 am

Still having trouble with this. Maybe someone can help:
When Merck spun off Medco in 2002, my Medco basis was $1887.96 (based on 5.35% of original Merck basis)
I had 470 shares Medco, which became 940 in the 20087 split.
After the 4/2/12 Express Scripts purchase of Medco, I ended up with cash plus 761 shares Express Scripts, worth I believe $54.18 per share or a total of $41,230.98. Above postings seem to suggest that, when all was said and done, the cost basis was still $1887.96?
When Cigna purchased Express Scripts, I got $37,098.75 plus 185 shares of new Cigna (@.2434 per share of Express Scripts). Combined value received: $93.09.
So is the basis for the Express Scripts stock sold still the original $1887.96?
Or, did it increase after the 2012 purchase by Express Scripts of Medco?

libralibra
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by libralibra » Fri Mar 22, 2019 11:40 am

gensuki found a great calculator online which seems to calculate things exactly. Note that since you have so many shares, the 1.45% of the cash part might not be as insignificant as the other posts here, and the instructions say to run it thru their other calculator first, and then take the results and run it thru the 2nd calculator.
http://www.costbasistools.com/redemption/redemption.php
http://www.costbasistools.com/cashtoboot/boot.php
gensuki wrote:
Thu Mar 21, 2019 3:37 pm
I was able to use this online calculator to compute my cost basis. Hope it is right. :wink:
http://www.costbasistools.com/cashtoboot/boot.php

The crux of it is that there is no cost basis for the cash. The cost basis is saved for when I sell Cigna. There is a cost basis for the partial share that was converted to cash. So my new cost basis is the original minus the amount for the partial share.

tks
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by tks » Sat Mar 23, 2019 4:57 pm

Thank you for posting the http://www.costbasistools.com/cashtoboot/boot.php link. Looks like a great resource. I am not an accountant, but it seems reasonable.

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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by LadyGeek » Sat Mar 23, 2019 6:28 pm

This thread is now in the Personal Finance (Not Investing) forum (cost basis).

tks, Welcome!
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vpix
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by vpix » Wed Apr 03, 2019 12:11 am

I have read various websites over the past few days and still have not figured out what my cost basis should be from the Express Scripts/Cigna merger. I have went through all my records and noted on a spreadsheet everything that may be pertinent to know. If anyone has a simple answer based on the information I have provided that would be most helpful. I listed everything from the first purchase of Merck to the subsequent mergers since.


Spin Off
Date Stock Quantity Price Comm Cost Proceeds Cash in Lieu Exch. Ratio Shares Frac Share
Purchase 6/2/1999 Merck 50 67.125 50 3406.25
Purchase 4/1/2000 Merck 100 64.9375 75 6568.75
Sold 6/8/2005 Merck -150 31.64 107.19 4638.81
Merger 8/19/2003 Medco 18 2.358 0.1206 18.09 26.2
Stock Split 1/25/2008 Medco 18 0
Merger 4/3/2012 Medco -36 28.8 1036.8
Merger 4/4/2012 Exp.Scripts 29 9.11 0.81 29.16 56.9375
Merger 12/24/2018 Exp.Scripts -29 48.75 1413.75
Merger 12/26/2018 Cigna 7 10.75 0.2434 7.0586 183.44

typical.investor
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by typical.investor » Wed Apr 03, 2019 5:44 am

vpix wrote:
Wed Apr 03, 2019 12:11 am
I have read various websites over the past few days and still have not figured out what my cost basis should be from the Express Scripts/Cigna merger. I have went through all my records and noted on a spreadsheet everything that may be pertinent to know. If anyone has a simple answer based on the information I have provided that would be most helpful. I listed everything from the first purchase of Merck to the subsequent mergers since.


Spin Off
Date Stock Quantity Price Comm Cost Proceeds Cash in Lieu Exch. Ratio Shares Frac Share
Purchase 6/2/1999 Merck 50 67.125 50 3406.25
Purchase 4/1/2000 Merck 100 64.9375 75 6568.75
Sold 6/8/2005 Merck -150 31.64 107.19 4638.81
Merger 8/19/2003 Medco 18 2.358 0.1206 18.09 26.2
Stock Split 1/25/2008 Medco 18 0
Merger 4/3/2012 Medco -36 28.8 1036.8
Merger 4/4/2012 Exp.Scripts 29 9.11 0.81 29.16 56.9375
Merger 12/24/2018 Exp.Scripts -29 48.75 1413.75
Merger 12/26/2018 Cigna 7 10.75 0.2434 7.0586 183.44
Were dividends reinvested?

Based on your records, I will guess no.

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vpix
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by vpix » Wed Apr 03, 2019 5:29 pm

Wow this is very detailed. I tried to recreate what you did in excel and couldn't figure out a few of your numbers.
How did you get the Cigna shares at 2.3777 and 4.75533 with the corresponding cost per share?
Also how did you calculate the proceeds for example on MHS 4/2/12 of $533.97 and cost of $186.64. If I see your math I can fill in the formulas on the rest of the cells.

My last question is that my 1099 B shows proceeds of $1413.75 from Express Scripts and Cash in Lieu from Cigna of $10.75. Total proceeds of $1424.50. If I am reading your sheet correctly, my proceeds for 2018 look to be $1967.27.

Once the math is confirmed, is your sheet saying I should be reporting a gain of the $1420.71 on my tax form? (I added the last 4 numbers for 2018 under LT gain on your worksheet)

I appreciate your help. I don't know how long it took you to do these calculations!

typical.investor
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Re: Calculating cost basis of Express Scripts in Cigna merger

Post by typical.investor » Wed Apr 03, 2019 7:24 pm

I have no further answers about the math.

It’s from the cost basis tool that Schwab offers when you are logged into your account.

There is disclaimer, of course, about no guarantees of perfection on it.

Consult tax advice if you feel it’s best. Personally I have used it, keep a record in case ever challenged, and figure since it’s an honest attempt on a small amount, any penalties for being wrong won’t be significant. Faulty reasoning perhaps.

Anyway, here there is for reference.

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