Former Santa Fe Pacific Corporation Shareholders
Information pertaining to Santa Fe Pacific Corporation (SFP) common stockholders of record on November 29, 1990 with respect to the December 4, 1990 distribution in which shareholders received one common share of Catellus Development Corporation (“catellus”) for every 4.0 shares of SFP common held, and one common share of Santa Fe Energy Resources (Resources) for every 3.317247 shares of SFP held:
TAX BASIS IN SANTA FE SNYDER SHARES
The Internal Revenue Service ruled that the stock distribution was tax free to shareholders (except for the receipt of cash from the sale of fractional share interest.) However, it is important that you recognize that even though the distribution was tax free, US tax laws require you to make a tax cost basis allocation for each of the two new stocks and a new tax cost basis allocation for the SFP common shares you owned as of November 29, 1990. The tax cost basis allocation must be used to determine any gain or loss on any of these shares at the time you sell them. If you owned more than one lot or block of SFP common shares on November 29, 1990 having different cost bases, the tax cost allocation described below should be computed separately for each such lot or block.
New Tax Basis for Each Security
Your new per share tax cost basis for your SFP common is 0.4599815 times your previous per share cost basis for SFP common.
Your per share tax cost basis for Catellus common is 0.6347744 times your previous per share cost basis for SFP common.
Your per share tax cost basis for Resources common is 1.2649490 times your previous per share cost bass for SFP common.
TAX BASIS IN DEVON SHARES
The tax basis of your SFS stock surrendered is substituted for the tax basis in the Devon stock received in the transaction. You received .22 share of Devon for each share of SFS stock surrendered. Therefore, your basis in each Devon common share is calculated by dividing your basis in each SFS share by .22. For example, if your basis in each SFS share was $10, then your basis in each Devon share would be $45.45.
Fractional Shares
No fractional shares of Devon stock were issued. Therefore, holders of SFS shares received cash in lieu of such shares. A holder who received cash with respect to the fractional share is treated as having received such fractional Devon share pursuant to the merger and then as having sold such fractional share for cash. In these cases, you will need to calculate your tax basis on the fractional shares for which proceeds are received in order to determine the amount of gain or loss with respect to the fractional shares.
Example: Shareholder owns 60 shares of SFS with a tax cost basis of $10 per share. Upon conversion, the shareholder received 13 shares of Devon and proceeds from the sale of .2 share of Devon. Fractional share of Devon stock multiplied by tax basis per share of SFS = total tax basis (.2 share stock x $45.45 = $9.09).
Accordingly, the shareholder’s taxable gain or loss would be the amount by which the proceeds received for such fractional share exceed or are less than the $9.09 basis. You would have received a form 1099B for tax year 2000 that identified the fractional share amount.