# Question about the THI/QSR situation



## Kaitlyn (May 13, 2011)

I left the default option, so I ended up with some QSR + Cash. I sold 200 shared of THI and got 160 of QSR. But the 160 shares of QSR didn't "cost" me anything right? I basically sold the 200 shares for cash, and "unrelated" to that cashout, was given 160 of QSR?

Or were part of the proceeds used to buy those 160 shares of QSR. In my WebBroker activity it lists "DISP" for the THI sale and "ACQ" for the QSR buy.

For the Tim Hortons line in my Activity it does have an asterisk next to it - does that mean it isn't final or something? I see no explanation for the asterisk on the page. It seems the amount shown means the THI was sold at $98.20, not the $65 that was supposedly what it'd be sold/valued at?


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## Potato (Apr 3, 2009)

TL;DR: So, basically you sold your THI for some value (the cash + QSR value), and will have a gain to report on that. Then, in a totally separate transaction (that just happened to be automatic for you), you purchased some shares in QSR at some value (the QSR value). If you sell QSR by tomorrow so it all comes out in the wash (same tax year), then it won't really matter how you slice and dice it for your final taxable capital gain (your final value on THI for the gain will be the cash plus whatever proceeds from QSR -- the merger value on the THI gain and QSR gain will cancel out); if you wait to sell QSR you'll have to track that cost base for future years.

--

I'm assuming you're asking about ACB in a non-registered account. I wasn't part of the THI sale, but have had similar partial share/cash take-overs before. Somewhere in the documents you got before the take-over there will be a line about whether this transaction is taxable or a roll-over, or if you have to _elect _to roll-over. Oh, here it is, man that is a doozy. Looks like it's a taxable transaction. http://www.mediantonline.com/0/000/823/627/information_statement_circular_11052014.pdf

Looks like it's a taxable event:


> Q: What are the Canadian federal income tax consequences of the transactions to holders of Tim Hortons
> common shares?
> A: Tim Hortons shareholders who are residents of Canada for purposes of the Tax Act will realize a capital gain
> (or capital loss) on the disposition of their Tim Hortons common shares pursuant to the plan of arrangement
> ...





> each holder of a common share of Tim Hortons will be entitled to receive
> C$65.50 in cash and 0.8025 newly issued Holdings common shares in exchange for each Tim Hortons common
> share held by such shareholder


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## 0xCC (Jan 5, 2012)

As Potato points out it does appear to be a taxable transaction. So the THI shares were effectively sold; you have to pay capital gains tax on that based on whatever your cost base was for the THI shares. The QSR trade gives you the new cost base for the QSR shares that you will need if you ever sell those shares (or they go though a similar transaction to this one forcing you to dispose of the shares).

As for the cash part, you can do a little math to figure out that you indeed got $65.50/THI share PLUS 0.8025 of a QSR share. So if you take the total deducted from your account for the QSR "buy" and subtract that from the total you received from the THI "DISP" and then divide that by the number of THI shares you held before all those transactions you should get $65.50.

You assumption that the QSR shares didn't cost you anything is incorrect from what I can tell. Those shares cost you whatever was deducted from your account as part of that QSR "ACQ" transaction.

When I try to make sense of the numbers in my account it makes sense if I figure out how many QSR shares I should be received and it also makes sense if I look at the cash left over after the THI disposition and the QSR aquisition and divide that by the number of THI shares I had (I get $65.50). What doesn't quite work out for me is trying to do everything on a per-share basis... Actually wait, it does if I take the rounding issue into account (you don't get a portion of a share, only whole shares).

The numbers work out like this for me:
THI sale = ~$98.20
Take out $65.50 for the cash portion
That leaves $32.70 which doesn't quite fit with the $40.77 that was paid for the new QSR shares until you account for the 0.8025 of a share. $32.70/0.8025 = 40.75 and after accounting for some fractional share issues (you should have seen a "CIL" transaction of around $20-$24 for the extra half a share of QSR you never got. My best guess is that "CIL" is Cash In Lieu) it should work out to pretty close to what it should be (probably less than a cent off).


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