the longer you wait rio the more it will cost, page-9

I'm a tax accountant, here's a breif breakdown

for example, say i bought my ext's for $2.70 (half todays price, although i actually paid significantly less!!!).

if rio offer cash at $12/share, our capital gain is clear $12-$2.70 = $9.30/share

now say rio offer us 1 rio for every 5 ext's (so $12 per ext effectively at todays rio price)

If we sell the new rio shares on the same day at say $65 our capital gain is $65/5 = $13 less $2.70 = $10.30/share

so $9.30 of the gain was on EXT, but was then rolled into the RIO holding, with $1 per EXT share of gains coming from the RIO shares.

The cost base of your RIO shares will always be the amount you originally paid for your EXT shares, unless RIO does a capital return or you buy more RIO's or something.