Can anyone help me figure out what I should do here?
Back in September, a company we own some stock in merged with another company. For every share of stock we owned in the old company, the new one gave us $ 8.45 in cash (approximately), plus a fractional share (.84882) of the new company’s stock.
I just got a 1099-B listing the total cash distribution for the exchange above. Trouble is, I have NO IDEA how to list this on my tax forms. How does one figure out a cost basis when you get a little money for every share of stock you’ve owned in something, plus a fractional share of the new stock?
If anyone can tell me how to do this, or guide me to a place on the IRS website, I’d appreciate it. I’m using TurboTax to do my calculations - I just need to figure out what the right numbers are to put in.
I can’t afford to consult an accountant on this. This is the only question I have, and the amount of money involved is not large, so it would almost certainly cost me more to walk in a CPA’s door than to pay tax on the entire amount of the stock’s worth. I just don’t want the IRS coming after me for $4.63 + interest in five years’ time (which has indeed happened to me before).
Your broker can probably tell you how to adjust the cost basis, if the company itself didn’t send you a letter. Another choice is to contact investor relations at one of the companies involved. I had a similar situation with a company that did a spinoff, and gave me cash in lieu for the < 100 shares of the spinoff. Schwab told me how to split the cost basis when I called them up.
Thanks for the advice. I will try calling the broker. Before I posted this message I called investor relations, which ran me around to 4 different people. They still couldn’t give me all the info I need. I didn’t get anything in writing from the company.
I don’t mind paying taxes, but I do mind not getting straight answers on how to do it correctly from the people who should know … I mean, these companies have armies of accountants, you’d think they could send a little info our way.
The IRS usually has free information available by phone (I’m assuming you’re a U.S. taxpayer) and they should be able to help you.
My mother-in-law, a couple of years ago, cashed in some stocks and had written out, in exquisite detail, the 400-year history of the stock, and what they paid and when it split and what amount of dividend re-investment happened each year and… man. Fortunately, she’s long retired and has very little income, so I just put the whole thing down as income and she still didn’t pay any taxes.
You effectively sold some fraction of each share of stock you owned in the original company. To determine that fraction, divide $8.45 by the final closing price of the original company. Then, figure out the original basis price of each share you had owned. Multiply the original basis price times the fraction you “sold”. Your capital gain on each share is $8.45 minus the basis price * the fraction sold.
Remember the fraction after you’re done, because you’ll need it again if and when you sell your stock in the new company.
19.75 (original basis price) x 0.338 = 6.675 (round up to 6.68)
8.45 - 6.68 = 1.78
1.78 x .338 = .60164
.60164 x 191 (number of shares held at sale) = 144.9134 (round to $144.91)
Sound right? My brain’s smoking - I don’t do math much any more.
(BTW, I did email the IRS to give them some thinking time on this one, but I don’t have a lot of faith in getting the correct answer from them. We’ve asked for info in the past and gotten an incorrect answer).
I’ll call investor services again and see what they say. We did have another (tiny) stock sale that was a spin-off, and that company was at least nice enough to send us a worksheet - even though the stock sold was a share fraction worth less than $10 and therefore not an issue with taxes, it will help greatly in the future when I need to know the basis for the sale of the remaining shares.