Bristol Myers Squibb Acquisition of Celgene

Home Fairmark Forum Taxation of Investments Bristol Myers Squibb Acquisition of Celgene

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  • #5315
    FinancialPlan
    Participant

    BMY acquired Celgene in November 2019. I went to a nationally known tax preparer and they cannot yet figure out the tax consequences for me and don’t know how to enter the information on the 1099 and 1009 B by brokerage provided. I owned 320 Celgene shares on the date of the merger and the same number afterward. For each share of Celgene I received one share of Bristol Myers Squibb and $50 in cash for each share.

    The market value of the Celgene stock was $34,569 according to my October statement (320 shares @ rate 108.03). In November after the sale I had the same amount of shares, 320 @ $53.40 for a market value of 18,220.80).
    I received $16,000 in cash.

    How would this be characterized for tax purposes? My brokerage showed on the 1099:

    320 shares sold/disposed on 11/21/19
    Proceeds reported 34,787.20
    date acquired: various
    Cost basis: $4117.85 (before the merger)
    Gain or loss: 30,669.35
    There is a notation on the 1099: “MERGER”

    The tax preparer to whom I went is nationally known. They were not sure how to enter this information on my tax forms.

    A gain or 30,669.35 is significant and would result in an underpayment of taxes for me. I had no control over the merger of these two companies and feel I didn’t really sell anything. The amount of stock I ended up with after the merger is the same but the market value declined.
    I did receive cash in the amount of $16K.

    If you divide $18,220.80 (stock value after merger) by $34,569.60 you get 52.70%. If you divided $16,000 by 34569.60, you get 46.28.

    I received more stock than $ from the merger.

    If anyone can please help me with this I will be very greatful. My tax prepare said they would have to call the IRS. They don’t seem to know how to enter the data on tax forms.

    #5316
    kaneohe
    Participant

    usually you receive something like this w/ discussion of tax consequences:
    https://www.sec.gov/Archives/edgar/data/14272/000114036119002181/s002620x1_s4.htm#tMUS

    see p.37 & 164 from the Table of Contents in the front.

    #5317
    FinancialPlan
    Participant

    Thank you. I’m still trying to figure out what tax I actually owe and on what tax form it should be entered.

    #5318
    kaneohe
    Participant

    Isn’t it capital gains………Sch D/Sch 8949?

    “U.S. Federal Income Tax Consequences to U.S. Holders

    The receipt of the merger consideration by U.S. holders pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder will recognize taxable capital gain or loss in an amount equal to the difference, if any, between (i) the sum of (A) the amount of cash, including cash received in lieu of fractional shares, received in the merger, (B) the fair market value of the shares of Bristol-Myers Squibb common stock received in the merger and (C) the fair market value of the CVRs received in the merger, each determined on the date of the consummation of the merger and (ii) such U.S. holder’s adjusted tax basis in its shares of Celgene common stock exchanged therefor.”

    #5319
    FinancialPlan
    Participant

    The fair market value of the Celgene stock was $34,569.60 on 11/21/19. The cost basis was $4117.85.

    After Bristol Myers Squibb acquired Celgene, the fair market value of the Bristol Myers Squibb stock was $18,220.80 on 11/21/19. The cost basis was $1,7880.

    I received $16,000 in cash as a result of the merger.

    How do I compute my tax liability?

    #5320
    FinancialPlan
    Participant

    I saw that material on the SEC’s website. I get. What I don’t get is how to compute what I should be taxed on. That is, what figure goes where?

    #5322
    kaneohe
    Participant

    “del datetime=”2020-03-06T03:00:18+00:00”>The fair market value of the Celgene stock was $34,569.60 on 11/21/19. The cost basis was $4117.85.

    After Bristol Myers Squibb acquired Celgene, the fair market value of the Bristol Myers Squibb stock was $18,220.80 on 11/21/19. The cost basis was $1,7880.

    I received $16,000 in cash as a result of the merger.

    How do I compute my tax liability?”

    I got a result similar (but lower) than the broker using your #s above.
    From the SEC definition of gain = Cash + FMV BMY + FMV CVRs minus Celgene
    cast basis = 16000 + 18221 + FMV CVR (???) – 4118 = 30103 which is similar to but lower than the broker result 0f 30669. I didn’t know anything about any CVRs here and if they added any more value but the broker value
    of 34787 after the merger is different than the 34221 from the numbers you gave.
    <
    What do you think the gain should be? I would be inclined to use the broker numbers. btw I know how painful a fully taxable merger is………usually mergers are tax free or you might pay taxes on the cash but a fully taxable merger is another animal esp when it takes you by surprise…..you can check out HPE/Seattle Spinworks/Microfocus INTL for my surprise of about the same size.

    • This reply was modified 1 month ago by kaneohe.
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