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I own stock in a company which recently spinned off one of its businesses. I got a number of shares of the new company for each 10 shares of the old company. The broker sent me a form 1099-B, showing $5.18 as gross proceeds. He explains that instead of giving me fractional shares, the company decided to give me cash. My question is: how is this amount to be declared to the IRS? Short term capital gains? Dividend? Does anyone know? I realize it's a minor amount, but I want to report it correctly.
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To be precise, one would have to calculate the cost basis of the fractional share sold, and list the transaction on Schedule D. But, as a practical matter, how much profit or loss would you have on the forced sale of such a small fractional share? -- so I suspect that many people would just list the $5.18 as a break-even sale on Schedule D. After all, the tax tables do go in $50 increments.
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