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Hello all,

My 1099-B reports a sale of stock (due to a merger). It lists the proceeds but not the cost basis. The stocks were originated from a Merck spin-off in 2003 (Express Scripts Holdings).

Is my cost basis the value of the stock the day I received it?

Also, as a result of the merger last year, I received cash in lieu. Is there a cost basis for this, or is it just zero?

Last annoying tax question (sorry, and thanks if you're still reading): Would be the date of acquisition be the day I bought the original stock (pre-spin-off and subsequent merger)? Or is it the day I got the cash in lieu?

Thanks again for any input (even if it's just pointing me to reading material. By the way, I've read IRS pubs 550 and 551. No help.

Besnt
DN549
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My 1099-B reports a sale of stock (due to a merger). It lists the proceeds but not the cost basis. The stocks were originated from a Merck spin-off in 2003 (Express Scripts Holdings).

I see you're new in these parts, so I'll grant dispensation from the part of this exercise where you go stand in a corner and beat yourself over the head with a 2x4 until I'm satisfied you've learned your lesson. I'll just state the moral:

THE TIME TO DEAL WITH MERGERS/SPLITS/SPINOFFS IS WHEN THEY HAPPEN!

That way you don't find yourself years down the road asking once simple but now difficult questions like

Is my cost basis the value of the stock the day I received it?

Beats me. Each of these events has its own rules which are fully explained in the literature everyone gets and most ignore when the event happens. At least it's not the anti-trust breakup of AT&T, so we have something to be grateful for.

The best starting point is Shareholder Relations. If they can't help you, maybe someone on the Fool's discussion board for the stock can.

Also, as a result of the merger last year, I received cash in lieu. Is there a cost basis for this, or is it just zero?

It has a basis, and at least there's a better chance of quickly getting your hands on the information you need to calculate it. If you can't find your literature, again, shareholder relations.

Last annoying tax question (sorry, and thanks if you're still reading): Would be the date of acquisition be the day I bought the original stock (pre-spin-off and subsequent merger)? Or is it the day I got the cash in lieu?

Those are the two likely candidates.

Whenever one of these events happens drag out your purchase confirmation(s), pencil and abacus and figure out the effect on what you owned and what you acquired. Make all the appropriate notes about the effect on the original stock on its confirmation, and create a new "confirmation" for anything you acquired. It takes a little time, which is why most people don't bother, but it takes a lot less time that it's going to take you now to reconstruct this stuff. Good luck.

Phil
Rule Your Retirement Home Fool
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drag out your purchase confirmation(s), pencil and abacus

There's my problem! <forehead slap>

I've been getting my nephew with his supernumerary fingers to do the ciphering. I should have known an abacus would be better.

--Peter
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You might give this web site a look.

www.costbasis.com

--Peter
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Thank you both for the feed back. I contacted investor relations at Medco, and they were very helpful. They even directed me toward the right documents for the 2003 spin-off event.

It turns out, this was not very complicated. At least the math isn't. I just needed a little direction from a friendly Fool.

Thanks again.

DN
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THE TIME TO DEAL WITH MERGERS/SPLITS/SPINOFFS IS WHEN THEY HAPPEN!

That way you don't find yourself years down the road asking once simple but now difficult questions like


Is it any easier if you sell both the original and spinoff on the same day?

We used to own Pixar, which eventually was bought out by Disney. Shortly after Pixar shares were converted to Disney, Disney spun off a small company called Citadel Broadcasting, which started out being a penny stock (maybe 31 cents) and was only worth in total about $50 in our account, but then went to zero in short order.

I sold off our Disney shares this year and had my broker "sell" the worthless stock too, on the same day.

Does that make things any easier, similar to listing "various" on the purchase date of multiple lots of stock sold at the same time. Or should I really still go through the same exercise of extracting the now worthless stock value to it's own cost basis?

While I don't have a 1099 yet, gainskeeper on our broker's site does not yet have a cost basis for either the Disney shares or the worthless shares. I've kept track of the Pixar/Disney cost basis, but the split was in my wife's account before we were married so I have a tiny excuse for not tracking it properly then.

Thanks

Aaron
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We used to own Pixar, which eventually was bought out by Disney. Shortly after Pixar shares were converted to Disney, Disney spun off a small company called Citadel Broadcasting, which started out being a penny stock (maybe 31 cents) and was only worth in total about $50 in our account, but then went to zero in short order.

I sold off our Disney shares this year and had my broker "sell" the worthless stock too, on the same day.


I would just allocate all the basis to Disney.

Phil
Rule Your Retirement Home Fool
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THE TIME TO DEAL WITH MERGERS/SPLITS/SPINOFFS IS WHEN THEY HAPPEN!

That way you don't find yourself years down the road asking once simple but now difficult questions like


Is it any easier if you sell both the original and spinoff on the same day?


Not necessarily. There are all sorts of spin-offs and mergers. Some are taxable when they happen, some require basis adjustments.

Ira
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We used to own Pixar, which eventually was bought out by Disney. Shortly after Pixar shares were converted to Disney, Disney spun off a small company called Citadel Broadcasting, which started out being a penny stock (maybe 31 cents) and was only worth in total about $50 in our account, but then went to zero in short order.

I sold off our Disney shares this year and had my broker "sell" the worthless stock too, on the same day.


I would just allocate all the basis to Disney.

Phil


Thanks Phil

That sounds like the easiest thing to do. For completeness I'll check our records and make sure that the spinoff wasn't framed in such a way that we were taxed on the value at the time.

Aaron
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