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I exchanged shares of stock for new stock based on the merger of the companies. The merger qualified as a tax-free reorganization. As part of the merger, I received cash for the partial share which would be recognized as a long term gain. How do I fill at Schedule D to show this merger transaction?

No. of Recommendations: 2
I exchanged shares of stock for new stock based on the merger of the companies. The merger qualified as a tax-free reorganization. As part of the merger, I received cash for the partial share which would be recognized as a long term gain. How do I fill at Schedule D to show this merger transaction?

Your acquisition date is the same as that of the old stock. To find your basis in the fractional share, divide your basis by the number of shares, including the fraction, that you received. This gives you a per-share basis in the new stock. Multiply by the number of whole shares you received. This gives you the basis in the shares you now own. The difference is the basis of the fractional share.

Phil Marti
VITA Volunteer
No. of Recommendations: 0
Dear Phil,

Thanks for the reply. I completed the calculation but I just determined the basis on the partial share by the following: I divided the original basis by the number of shares, including the fraction, that I received for my per-share basis in the new stock. Then I multiplied that number by the fractional number of whole shares I received for the fractional share basis (same answer as what you recommended). I then calculated the difference between the fractional share cash distribution and the basis to determine the long term gain.

NOW, how do I fill in Schedule D, PART II, line 8?
DO I fill in the form for just the sale of the fractional share only?

I have also been asked to attach a statement per Treasury Regulation 1.368-3 detailing the exchange with my 2000 tax return.

Since I didn't receive the cash until January 10, 2001, when do I submit schedule D with 2000 return or 2001 return?

No. of Recommendations: 2
> NOW, how do I fill in Schedule D, PART II, line 8?
> DO I fill in the form for just the sale of the fractional share only?

Just for the fractional share.

> I have also been asked to attach a statement per Treasury Regulation
> 1.368-3 detailing the exchange with my 2000 tax return.

In every one of these I've dealt with the company has sent a fill-in-the-blanks form. If they didn't, check the investors' relations area of their website for the verbiage.

> Since I didn't receive the cash until January 10, 2001, when do I submit
> schedule D with 2000 return or 2001 return?

Report it in accordance with the 1099, i.e. if they sent you a 2000 1099, report it in 2000. If you never get a 1099, report it in 2001.

Phil Marti
VITA Volunteer
No. of Recommendations: 0
I had a couple of mergers last year (Visio merged with Microsoft, Homegrocer merged with Webvan).

I purchased 25 shares of Visio on 3/24/99 (total came out to \$671.10). The stock was converted to Microsoft on 1/11/00 (11.25 shares).

I purchased 50 shares of Homegrocer on 5/15/00 (total came out to \$304.85). The stock was converted to Webvan on 9/7/00 (53.8025 shares).

For the fractional share of Microsoft, I came up with:

\$671.10
-------- = \$59.65 per share basis in new stock
11.25

\$59.65 X 11 = \$656.19

\$671.10 - \$656.19 = \$14.91

For Webvan:

\$304.85
------- = \$5.67 per share basis
53.8025

\$5.67 X 53 = \$300.30

\$304.85 - \$300.30 = \$4.55

Are these calculations correct?

Also, the 1099-B statement listed the gross proceeds for Microsoft as \$26.48 and Webvan as \$3.18. Would I use these to determine what goes on schedule D? If so, how?

-- LB
No. of Recommendations: 2
Are these calculations correct?

I didn't check your math, but the method is correct.

Also, the 1099-B statement listed the gross proceeds for Microsoft as \$26.48 and Webvan as \$3.18. Would I use these to determine what goes on schedule D? If so, how?

Those are your procedes for column (d). I usually just put "[ticker] cash in lieu" in column (a). Your basis calculations go in column (e), and your acquisition date is the date you acquired the original stock, thus determining whether all this is on line 1 or line 8.

Phil Marti