As explained on the "cash to boot" page of this website, mergers between corporations sometimes are paid for with a combination of stock and cash, which provides a unique accounting challenge. The general tax rule is that you must pay capital gains tax on such a transaction, but only to the extent of "cash to boot" which is the amount of cash you actually received.
In other cases, such as the Schering-Plough merger with Merck, the cash portion is treated as a redemption (unless you already owned shares in Merck.) If you owned Merck already, you have to run tests set forth in Section 302 of the Internal Revenue Code to determine if you meet the requirements to be eligible to treat the cash portion of the merger proceeds as a redemption rather than a dividend. Don't worry, we can help. Just use our Calculator for Section 302 Tests.
Our handy calculator tool will help you deal with your accounting nightmare!
Check back shortly after the closing date of the transaction for pre-filled data for upcoming "cash to boot" mergers such as: BJ Services (by Baker Hughes)
The calculator has pre-filled data ready for these and other recent corporate stock merger transactions which had "cash to boot": Burlington Northern (by Berkshire) Marvel (by Disney) Schering-Plough (by Merck) Sterling Financial (by PNC) Trane (by Ingersoll Rand) Wyeth (by Pfizer)
Click on the boot below to access the calculator for stock mergers with "cash to boot"
Cash to Boot Calculator
The gain or loss should be calculated separately for each tax lot (purchase date.) If you have a huge number of tax lots from dividend reinvestments, you can use the average cost method, but you must create two pools--one for long-term tax lots and one for short-term tax lots.
In using this calculator, make sure that the cash payment you received was for a cash and stock merger, not for cash in lieu of fractional shares as a result of a stock split or stock for stock merger. In that case, you should use thestock split calculator or the stock merger calculatorinstead.
In many cases, you might even receive two cash payments for the same transaction--a larger one for the "cash to boot" and a smaller one for "cash in lieu" of fractional shares.
Certain complex transactions such as the Banknorth Group Inc simultaneous spinoff of TD Banknorth Inc and "cash to boot" sale to Toronto Dominion for TD common stock plus cash can be handled by first applying the spinoff calculator and then using the resulting new cost basis in the "cash to boot" calculator for the rest of the transaction.
You can also use the calculator for merger transactions where you provide the data.
If you know of other mergers with "cash to boot" please help us build our database for the benefit of all users. Please send us the details so that we can add it to the table of pre-filled values.
