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<<Does your message mean that KAT is right about the how the fractional share is treated, i.e. as a cash dividend, and that MKUNKA was wrong that the fractional share will be treated as a sale of part of the first lot of RNTa?>>

I didn't say the fractional share is treated as a dividend, but only that I thought in the mists of time there was a rule under which you could ELECT to treat it that way if you thought that would simplify things. But I can't lay my hands on that rule, so either I made it up or the rule went away. I'm virtually certain the cash in lieu of fractional share will be treated as a sale. In theory it can be a dividend, but (for technical reasons I won't go into here) the circumstances for dividend treatment are not present. Anyone who wants details should read Rev. Rul. 66-365.

<<Related Questions: Do I divide 310 shares, or 310.87875 shares proportionally into 6 lots?>>

A perceptive question. The answer is 310.87875. (Roy said 310, but I'm guessing he misinterpreted your question and will agree with me when he reviews your original message). You are treated as if you received 310.87875 shares and sold the fraction, so of course you must allocate some basis to the fraction to determine your gain on that deemed sale. And the fraction is part of what you received for the six lots, so you are allocating the total 310.87875 over the six lots. As I believe someone pointed out, you are deemed to have sold .87875 shares out of the first lot.

To answer one more question, I believe GM will provide precise data to its shareholders concerning the basis allocation. Calculations you perform based on the closing price on the day of the transaction may not match the figures they use, although they should be quite close.

All this is more trouble than really necessary given that the tax involved is no more than pocket change, but it's fun (to me at least) to track these questions down to their precise answers.

KAT in Chicagoland
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