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Author: makfan Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 942  
Subject: Re: Cost basis of merged company Date: 12/1/2001 2:53 PM
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Chevron merged with Texaco to form ChevronTexaco (CVX).
I received 0.77 shares of ChevronTexaco for each share of Texaco.
How do I determine what my cost basis is for my new shares? Multiply by 0.77?

Hi John,

I always do the calculations in terms of total cost basis to get the new per share basis.

Let's say you originally bought 100 shares of TX at $50.00 per share, plus a $12.00 commission. Your total cost basis is $5012.00 for the 100 shares, or $50.12 each.

After the merger, you now have 77 shares of CVX (100 * .77). Your total cost basis is still $5012, so you divide $5012 by 77 to get a new per share cost basis of $65.0909 per share.

Note that $65.0909 is equivalent to $50.12 divided by (NOT multipled by) the ratio of 0.77. To do the conversion, you multiply the share count by the split ratio and divide the cost basis.

Hope this helps.

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