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TransOcean Shares

Are there any TransOcean shareholders here who have ***correctly*** entered the transactions relating to the reclassification of TransOcean's shares that occured about Nov. 28? (Every TransOcean shareholder received .6996 shares of the "new" TransOcean in exchange for 1 of the "old" TransOcean shares. They also received $33.03 for each of their old shares. If the calculation resulted in them being entitled to a fractional share, they were paid out for that fractional share on about Dec. 11. This whole thing related to a takeover/merger with GlobalSanteFe. The key here is to end up with the PROPER adjusted cost basis for the NEW shares and the proper realized capital gain/loss. According to a recent news release from TransOcean, cost basis must be allocated to the "removed" shares on a proportional basis. The various statements from my broker, both in writing and on-line, indicate that the new cost base for the reclassified shares, at least in my brokerage account may be borked. I'd be interested in hearing from someone who has solved all aspects of this problem involving posting all this in Quicken: the reduction in the number of shares and the proper calculation of the cost basis of the new shares.

Reply to
sharx35
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Glad you brought this up.

I'm in the same boat. Bought 150 shares of TransOcean in 2002 at $34.408/share.

104.94 of those shares became 104 shares of "new" TransOcean. 45.06 shares were bought back at $109.9533955/share. Also received $125.96 cash in lieu for fractional share.

I've tried a couple of scenarios, haven't been happy with any results. I'm pretty sure I "sold" the 45.06 shares for $109.+/share. Other than that I'm having trouble reconciling various sell/buy, remove/add, and merger transactions.

Left a call for my broker today to get me the cost basis for the new shares and sort out gains. Looks like my cap gain is probably 45.06 x $109.... or $4,954.50

  • 125.96 for cash in lieu.

I've never seen a "merger" quite like this one. Any finance/tax gurus want to jump in on this one?

sb

sharx35 wrote:

Reply to
slb

Did you reduce your cost basis by [45.06 divided by 150] times total cost basis prior to the reorganization?

Reply to
sharx35

Well, here in Canada, my broker said that the share reduction amounted to a "deemed disposition" of those shares, for income tax purposes. That recent bulletin on the TransOcean website suggested that cost basis had to allocated to the "redeemed shares" pro rata, in calculating cap g/l. Technically easy. The problem is HOW to get Quicken to represent it all properly. Or, with this be yet another example where I have to manually footnote my financial reports?

Reply to
sharx35

Sounds like you, in order:

  1. Received a return of cap which reduces cost basis of your holding.
  2. then you exchanged shares old for new at the existing total cost.
  3. then you sold fractional at a gain or loss.
  4. what is left is new whole shares at the proper cost basis.

Eric

Reply to
Eric

I'd tend to agree with you, Eric. That's the approach I will use come income-tax time (Canada). My broker, for some reason, is using the initial market value for the new whole shares, rather then the balance of the original cost base left after the R of C. My way defers some capital gains until all the shares are eventually sold. The broker's way captures all capital gains up to the time of the transactions onto the 2007 tax year. In the end, the taxes paid will be equal, giving that the tax scenario in the year of eventual disposal is the same.

Reply to
sharx35

Sounds like you, in order: 1. Received a return of cap which reduces cost basis of your holding. 2. then you exchanged shares old for new at the existing total cost. 3. then you sold fractional at a gain or loss. 4. what is left is new whole shares at the proper cost basis.

Reply to
Eric

Is your broker saying the "deemed disposition" applies to all shares you held or just those that were sold?

I still think my only cap gain is on the 45.06 shares plus the fractional I was "forced" to sell as a result of the merger. I recorded both as sales to reflect the gain and update my account cash balance..

I assume the 104 shares were "exchanged" at the same value (like a company name change?). I did a remove and add shares valued at the same $109.+/share. I then updated the price as of November 30 to 137.29/share.

I may not be footnoting my financial reports but I added plenty of memos to the transactions in case I later discover that this was incorrect.

sb

sharx35 wrote:

Reply to
slb

The broker's company Bank of Montreal Nesbitt Burns is treating it as if ALL

85 old TransOcean shares were "deemed disposed" in return for: $33.03 USD an old share plus 59 New Transcean shares. The key is that BMO Nesbitt Burns is valuing the New shares, for the purposes of calculating the cap. gains of the transaction, as being their trading value after the market opened after the date of the transaction (About Nov. 28). That resulted in a cap. gain of about $750 CDN. This is contrary to how both Quicken and I are doing it: We consider 26/85 of the original cost basis as having been the cost basis of the 26 share reduction (85-59). The remaining 59/85 of the original cost basis is now the NEW cost basis for the 59 new TransOcean shares. That approach, which I am using on my 2007 income tax form, results in a cap. loss of about $250 CDN. TransOceans website comments as of early December suggest that my approach which is the same as Quickens, is the correct approach to take: emphasis on the proper apportioning of the original cost basis. See TransOcean website investor information.

Reply to
sharx35

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