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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Re: Post merger tax headaches... Date: 4/1/2002 4:25 PM
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I got 0.2 shares of MACR for every share of ALLR, plus $3.00 per share in cash for every share of ALLR owned. My question is this...

The first place you need to look is to the new company. They are the only ones who have definitive information on their merger. You should have received some information at the time of the merger that explained how the transaction would be taxed. Try their web site or a phone call to the investor relations department.

On my online Turbotax form, I have 4 fields to fill in: Net Sales Price, Date Sold, Cost or Basis, and Date Acquired. The date fields are no problem.

But in the net sales price, do I put the amount reported on my 1099-B (which shows just the cash portion received) or do I use the total FMV of the entire transaction? (By doing the calculation shown above, they obviously aren't the same.)

And in the Cost or Basis field, do I use the actual price I paid for the original ALLR shares, or do I use the calculation mentioned above for the "cost basis assigned to sale"?


A common way these are treated (but not necessarily correct for your situation - see above) is to calculate the total value you received on the merger date. Take the FMV of the new stock you received and add in the cash. Based on the proportion of each, allocate you old basis to the stock and the cash.

What you are reporting on your schedule D is the cash part of the transaction. So you enter the cash you received (from the 1099B) as the sale proceeds, and the portion of your old basis you calculated above as the basis.

Remember to adjust the basis in your new shares to reflect the fact that you essentially sold part of your old stock in the merger.

--Peter
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