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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121585  
Subject: Re: Cost basis from a spin off Date: 2/16/2013 9:55 PM
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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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