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At the time of merger, JNJ price is higher than the specified collar upper boundary, say $75 (You never know, it's already close to $70 as of today). One GDT share exchanges for 30.40 + .6797 JNJ @$75. As such, the value increases to 81.38. So the gain should be reported as the less of 81.38-50=31.38 and 30.40, i.e. 30.40. The basis of .6797 JNJ is based on market value, i.e. 50.98. Am I right?

Could be. Terms of a merger can always be different if outside the collar region.

Also, do you know how the options will be affected through such cash+ stock merger in general? Thanks.

No idea. They will be adjusted in some fashion so that each investor's option holdings represents a consistent value of stock.

Ira
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