When did America Online and Historic TW Inc. (formerly named Time Warner Inc.) merge and what was the exchange ratio?
America Online and Historic TW Inc. (formerly named Time Warner Inc.) completed their merger on January 11, 2001.
Prior to Time Warner's 1-for-3 reverse stock split at 7:00 pm on March 27, 2009, former shareholders of America Online, Inc. were entitled to one share of common stock of Time Warner Inc. (formerly named AOL Time Warner) in exchange for each common share of America Online, Inc. Prior to the 1-for-3 reverse stock split, former shareholders of Historic TW Inc. were entitled to 1.5 shares of Time Warner Inc. common stock in exchange for each common share of Historic TW Inc. After March 27, 2009, the number of shares of Time Warner Inc. that former shareholders of America Online, Inc. and Historic TW Inc. received after exchanging their shares was 0.333 and 0.5 shares, respectively, reflecting the 1-for-3 reverse stock split.
Because of the spin-offs of Time Warner Cable Inc., AOL Inc. and Time Inc., you may also receive shares of those companies in connection with the exchange of your shares of America Online, Inc. and Historic TW Inc.
How do I determine the tax basis of the Time Warner common stock I received for my stock of Historic TW Inc. in the merger of America Online, Inc. and Historic TW Inc. (formerly named Time Warner Inc.)?
You should discuss this matter with your own tax advisor. In general, a holder of common stock who received Time Warner Inc. (formerly known as AOL Time Warner) common stock as a result of the merger between America Online, Inc. and Historic TW Inc. did not recognize a gain or loss as a result, except to the extent cash was received instead of a fraction of a share. Generally, the aggregate tax basis of the Time Warner Inc. common stock equals the aggregate tax basis of the common stock held (excluding the portion of such basis allocated to the fractional share), and the holding period includes the holding period of the Historic TW Inc. common stock. If cash was received instead of a fraction of a share of Time Warner Inc. common stock, the holder would realize a capital gain or loss equal to the difference between the ratable portion of the tax basis of the Historic TW Inc. common stock that is allocated to such fractional share and the cash received.