Ira and Paul,

Thank you both for your prompt attention to this matter.
Sincerely,

Mike Roth



IraS1@aol.com wrote:
> Paul,
>  
> Your answer contains some errors and was incomplete. In addition to being a
> complex transaction because of the stock + cash nature of the merger, the fact
> that the new company retained the Wellpoint name and ticker symbol adds another
> wrinkle.
>  
> Here's what Mike Roth should have done:
>  
> First, he needs to calculate the total value received in the merger: 60
> shares * $23.80 = $1428 (cash) plus 60 shares * $101.33 = $6079.80 (shares of
> new Wellpoint) for a total of $7507.80
>  
> Since this merger is 1 share for 1 share the next step is very easy. There
> are three scenarios (you covered the first two in your reply):
>  
> (1) If the club's cost basis in the old Wellpoint was less than $6079.80
> (that is, less than $101.33/share), all the cash received is reported as a short
> or long term income item. 
>  
> (2) If the club's cost basis in the old Wellpoint was more than $6079.80
> (that is, more than $101.33/share) but less than $7507.80 (that is, less than
> $125.13/share) then the gain (the difference between the $7507.80 and the old
> cost basis) is entered as a short or long term income item, and the
> difference between $1428 (cash received) and the gain is entered as a return of
> capital "income" item.
>  
> (3) If the club's cost basis in the old Wellpoint was more than $7507.80
> (that is, more than $125.13/share) then the merger is a "loss". The cash
> received ($1428) is entered as a return of capital.
>  
> In general, the transactions for scenarios 1-3 should be entered before the
> merger transaction so that the gain/return of capital is assigned to the
> appropriate security and the basis adjustments for the surviving stock are
> correct (though it could be that the bivio software will automatically do this
> correctly). However, there is no need to enter a merger transaction in the case
> of the Wellpoint/Anthem merger (for an owner of the old Wellpoint) since
> the number of shares in the new Wellpoint is the same as the number of
> shares in the old Wellpoint and the ticker symbol is unchanged. Return
> calculations and capital gain/loss on the future sale of the shares should be
> calculated based on the original cost basis (as adjusted above) and holding
> period.
>  
> Finally, the club needs to enter the reorganization fee. Reorganization
> fees adjust the cost basis of the shares in the surviving company in a merger.
> The $20 fee should be entered as a "return of capital" income item for NEGATIVE
> $20. (We want to increase the cost basis.)
>  
> Ira Smilovitz
>  
> In a message dated 12/8/2004 3:49:27 P.M. Eastern Standard Time,
> moeller@bivio.com writes:
> Mike
> Roth wrote:
> > On our brokerage account it shows we sold our 60 shares
> for
> > $23.80 per share.  We were also charged a Reorganization
> Fee
> > of $20.00?  The stock symbol is still the same (WLP) and
> we
> > still have 60 shares.
>
> Wellpoint Health Networks Inc merged
> with Anthem, Inc on 11/30/04 and
> Anthem changed its name to WellPoint, Inc
> and its ticker to WLP.
>
> Below is a document from the Wellpoint website
> with information about
> the taxable status of the
> merger.
>
> http://media.corporate-ir.net/media_files/IROL/13/130104/corpgov1/Tax_QA.pdf
>
> First
> record this transaction as a merger. Select the 'transactions'
> link next to
> the stock on the Accounting / Investments page and enter
> a merger for an
> equal number of WLP shares. Leave the 'Cash Received'
> field
> blank.
>
> https://www.bivio.com/my-club-site/accounting/investments
>
> According
> to the document above, the taxable gain is the lesser of
> cash received or
> difference in value of the cash and stock received
> and the club's current
> share basis.
>
> For example, if your club owned 50 shares of Wellpoint
> with a cost
> basis of $5000, and your received 50 shares of WLP +
> $23.80/share,
> then the figures would be:
>
> WLP value 11/30/04
> $101.33
>
> cash value: (50 * 23.80) = $1190
> basis difference: (50 *
> 101.33 + 1190) - 5000 = $1256.50
>
> So the lesser value, $1190, would be
> considered the taxable gain. You
> would enter this as an income entry for
> Long Term or Short Term gain
> depending on how long you held the original
> shares.
>
> If the club's basis in the stock was $6000, then the figures
> would be:
>
> cash value: $1190
> basis difference: (50 * 101.33 + 1190) -
> 6000 = $256.50
>
> In this case, the $256.50 would be the taxable gain.
> This can be
> recorded in two parts, first as a Return of Capital income
> entry for
> $933.50 and then as a Short or Long Term gain entry for
> $256.50.
>
> Paul Moeller
> bivio Inc.
>
>
>