Stock/cash corporate merger resulted in 1099 for cash portion. Basis calculation results in loss but can’t claim loss on a merger. How do I adjust this in TurboTax?

Forum|Forum|3 years ago
February 19, 2023
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TurboTax Premier Online

Best answer by GeorgeM777

Maybe those directions are not a good way to do it? These directions are different but would result in a similar situation with a loss on some items that would need to be zeroed out somehow and the gain to be otherwise edited on others.

https://s21.q4cdn.com/[removed]/files/doc_downloads/docs/merger_tax_consequences.pdf

Yes, you adjust your basis lower based on the cash received. You are correct in that you cannot report the loss from the merger on your tax return but neither do you have to pay tax on the cash received. Instead, the cash received reduces your basis in the new stock. All of this assumes that your original basis was greater than the total compensation received, that is, the stock and cash you received in the merger.

@EH1

DianeW777

It seems like you received cash in lieu of fractional shares. Please review the details below to help you report this income.

Reporting this transaction is like reporting a sale of stock.

How to Report Cash in Lieu of Fractional Shares

The IRS considers cash for a fractional share to be money received as the result of a stock sale.
This transaction must be reported on IRS tax form Schedule D Capital Gains and Losses.
The date of the sale (when cash was received) and the date of the original stock purchase is needed to complete the tax form.

Tax Basis Example: Assume a shareholder has an aggregate $100 basis in 50 shares of ABC stock ($2 per share), and the fair market value of one share of ABC stock is $66.65. Following the ABC Merger, the shareholder should have an aggregate $100 basis in 64.1 shares of ABC stock (50 shares x 1.2820, or $1.56 per share), and should be treated as having sold 0.1 shares of ABC stock with a tax basis of $0.156 ($1.56 x 0.1 shares) for $6.67 ($66.65 per share fair market value x 0.1 fractional shares).

Once you have your information you will complete the entry in TurboTax using the following steps.

Open (continue) your return if it isn't already open.
In TurboTax, search (upper right) > Type 1099-B (include dash) Press enter > then select the Jump to link
Answer Yes to Did you sell stocks, mutual funds, bonds, or other investments in 2021?
- If you see Here's the info we have for these investment sales, select Add More Sales.
Answer NO to Did you get a 1099-B or brokerage statement for these sales? Or answer YES if you want to try to import it.

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EH1Author

Hi,

I did get cash in lieu for one fractional share but that one I have sorted.

but more generally we received cash + shares in the merger. $x cash and $y worth of new stock for $z original stock.

for some ESPP and REU stock, I had basis $b greater than both the value of new stock at time of merger and the value of the cash received ($b > $y + $x).

so when I input the info into TurboTax I end up with a loss. Because cash received is greater than basis on the cash portion.

However I cannot take a loss on a merger transaction. Do I just adjust the basis down to be equivalent to the amount of cash received or should I adjust the gain/loss some other way. Seems like I should adjust the loss directly rather than reporting an incorrect basis but idk.

i have been following this for splitting basis among new shares and cash: https://www.merriman.com/news/how-to-report-a-cash-and-stock-merger-on-your-tax-return/