Discussion:Scottish power - iberdrola transaaction

thanks.

ps - - i'm a cpa in oakland ca

In that situation, the cash received <in clients case 11 cents on a 1099B> is a taxable transaction.

Appears that Scottish power purchased a company called pacific corp a while back. My client received the Pacific Corp from his Aunt when she passed. He actually had the option to sell shares on 4/27/07 when this situation took place and he did. In our situation we had to recalculate the basis on the original Pacific Corp shares to 1985 when he first received them. couldn't find anything and the refund differential between 0 cost and 0 gain was $150 so we used a middle of the road approach for cost.

Hope this helps.

I think thhis transaction is separate from the Pacific corp transaction from 2006.

Jim M

I called a buddy with a larger tax practice and team of perfessionals, he is casually looking into it and will hopefully get back to me.

Good luck

Any fractional shares would have been sold for cash.

The good news is that the UK notional tax credit on Scottish Power dividends would not have been creditable previously, whereas Spain has real withholding so future dividends will not be doubly taxed unless the owner is UK resident but not domiciled.

Why would this transaction not be dealt with as a sale of 52.3% for cash and an stock merger/exchange of the residual? Then the basis would be allocated in likewise ratios to record a realized capital gain on the increment sold for cash. The remaining basis would be carried as the basis of the new shares received in exchange.

That link also takes you to some good Q&As. The FMV of the Iberdrola shares received is specified in question 2, and question 3 has a good example for calculating clients’ gains or losses, and tons of data – exchange date, exchange rate, dividend, etc.

They’ve also indicated elsewhere that the transaction will not qualify as a tax-free reorganization for US federal income tax purposes. For example, see pg 25 of this Form 425 document: http://www.sec.gov/Archives/edgar/data/1045513/000119312506242973/d425.htm

To Jacque: one reason it’s not as simple as the 53%/47% split you indicate is that, as Fred mentioned above, the shareholders had a choice of what they’d receive. In the aggregate, the 53/47 thing works, but each individual shareholder could elect anywhere from 100% cash to 100% stock, with the final result of what they’d get dependent on what all of the other shareholders elected.

And ancient history for Fred: With regard to the SP acquisition of Pacificorp back in 1999, the 5/6/99 proxy statement filed with the SEC indicates that the shareholders of PC would get 2.32 shares of SP for each share (or .58 SP ADS per share – more the likely scenario if your client was holding shares in an American brokerage account). Maybe that’ll provide additional support for the middle-of-the-road approach you took? Link: http://www.sec.gov/Archives/edgar/data/1045513/0000950130-99-002711.txt

but the information presented here is awesome. Because someone somewhere has had the issue before.

Again thanks.

Mike

Eileen

Thanks

Karen

But the 10-Ks for Pacificorp are available at sec.gov (FYI, the CIK is 0000075594) all the way back to the 1994 filing, so if you don't mind a little searching time, you could pull up each year and get both quarterly dividend and stock price high/low (to estimate equivalent # shares) right out of the Quarterly Financial Data. I pulled up a couple (one early, one just prior to the SP acq) and both showed dividends of $0.27 per quarter. [Edit added 4/13/08 for the benefit of future readers: just used Factiva to get PPW's dividends across the period, and yes, they were consistently $0.27/quarter from April 1993 to Oct 1999. Prior to that, they were higher - in the range of $0.36 to $0.385 for the period I researched; also there was one final dividend in Dec 1999, for $0.038/share.] So the price per share may be the primary variable in your calculations.

Without that, I guess I need to put $0 for the basis. Ouch. Any suggestions? Thanks. Perci

I am confused, however, as to how the Scottish Power/Pacificorp return of cash in 2006 affects my cost basis for capital gains from the Scottish Power/Iberdrola transaction. We received $154.94 in ordinary dividends and $889.12 in nondividend distributions. We held 116 shares of Scottish Power before the ROC and 92 afterward.

If anyone can help me, it would be great!

Thanks!

Thanks!

I've held PPW/SPI/Iberdrola stocks since the early '80s and am also stuck on how to deal w/ the 2006 transaction. Is the nondividend distribution a return on original capital invested? What would be the ratio between original SPI to new SPI shares?

Thanks for any comments.

However, I have 1975 and 1976 Dividend Reinvestment Statements that show a share of PPW being: $20.02 on 7/10/75; $18.88 on 10/10/75; $20.71 on 1/10/76; $21.36 on 4/10 76; and $21.34 on 7/10/76

THANK YOU Trillium for sharing your knowledge/research on this, and taking the time to share with the rest of us - you've probably saved me hours in research time!

It's possible that your free trial doesn't give you full access - in which case, call around to your local business schools or some of the larger libraries and see if they'll give you guest access.