Need Help determining how to enter Cash In Lieu of Fraction shares received from a spinoff

Forum|Forum|4 years ago
February 28, 2022
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Turbo tax is asking me to enter the cost or other basis for an amount reported as cash in lieu of fractional shares. Can anyone help?

I imported all of my investment forms from my broker. Turbo Tax entered info from my 1099-B as follows:

box 1a (description): 0.500 Organon & Co

box 1c (date sold): 06/03/2021

box 1b (date acquired) is not filled in

box 1d (sale proceeds): 14.91

box 1e (cost or other basis) is what it is asking from me

sale category is currently checked as box E (long term noncovered)

From my broker:

Organon was a spin-off of Merck. The amount reported on the 1099 is the Cash In Lieu of fractional shares. We do not have your original Merck cost basis on file.

So, again, my question is how to fill in box 1e (cost or other basis). My broker sent me an article, but it only confused me more. Same is true for the questions/answers I found on this site as well as others.

Thanks in advance for your help!

TurboTax Home & Biz Windows

Best answer by JohnB5677

Basically, the entire transaction is a zero-sum event in which the total cost basis of all the shares owned after the spin-off equals your total cost basis in the shares owned before the spin-off.

The value per share of the spin-off is $14.91/0.500=$29.82. This is not the basis.

You must get the value of the original stock at the time just before the spin-off. I will use the example of $100.

$100 - $29.82 = $70.18. This is the current adjusted value of the original stock.

You must have the basis of the original stock. Example $35.

Calculate the percentage change: $35/$100 = 0.35 (35%)

Basis of spin-off = 0.35 X $29.82 = $10.44

Since you sold 0.50 shares you would post $10.44 X 0.50 = $5.22 to the basis of the spin-off shares sold.

JohnB5677Answer

Basically, the entire transaction is a zero-sum event in which the total cost basis of all the shares owned after the spin-off equals your total cost basis in the shares owned before the spin-off.

The value per share of the spin-off is $14.91/0.500=$29.82. This is not the basis.

You must get the value of the original stock at the time just before the spin-off. I will use the example of $100.

$100 - $29.82 = $70.18. This is the current adjusted value of the original stock.

You must have the basis of the original stock. Example $35.

Calculate the percentage change: $35/$100 = 0.35 (35%)

Basis of spin-off = 0.35 X $29.82 = $10.44

Since you sold 0.50 shares you would post $10.44 X 0.50 = $5.22 to the basis of the spin-off shares sold.

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caroleena5Author

Thank you, JohnB5677. I appreciate that you took the time to explain this to me.

I still don't know what to do since my broker told me they do not have my original cost basis on file, and it seems that is the only thing Turbo Tax is asking me for.