Stock Procceeds (seems a simple question)

[Pacun]

I have about 2K of "stock proceeds" that read "undetermined" for short or long gain. It also read that "basis not reported to the IRS"

On the explanation I have $12 for selling AT&T INC with additional information as Sale
On the next line I have TIME INC MRG for a total of $200 and additional information as "Merger"

On the next line I have TIME WARNER INC MRG for a total of $1800 and additional information as "Merger"

I love when people bring their documents 5 days before October 15. I normally don't do extensions but he is my good friend.

Question:
Should I start digging to see the cost of the stock for the proceeds labeled "Merger"?
I am planning to add the $12 of AT&T with 0 basis since it will cost more to find out how much it cost vs paying tax on $12.

 

 

[grandmabee]

Look up online, there is a worksheet for the merger.  Or if it doesn't make a difference on return go with zero basis.

[Pacun]

Thank you for the info.

I found this on the merger info: "Time Warner shareholders received $53.75 in cash and 1.437shares of AT&T common stock for every share of Time Warner common stock"

 

Let's say, I had 10 shares of Time Warner and it cost me $25 per share. My basis is $250. Since I got 14.37 shares of ATT, I will consider that those shares have a basis of $250. All I have to report is $537.50 which is the cash I got for the sale of my 10 shares.  Is that approach wrong?

[Catherine]

On 10/11/2019 at 8:44 PM, Pacun said:

Is that approach wrong?

Technically, yes, you are supposed to allocate the basis between the cash received per share and the new shares of AT&T.  Practically speaking (and especially if any other pertinent supporting documentation is missing) the approach you listed can be the only realistic one.  I figure that the IRS will never balk at getting more tax dollars now, and that people do all kinds of crazy things that mess around with their stock basis later.  As long as you end up with basis that can be defended, for reasons that make sense (including "this was the only way to track it all cleanly"), the worst that can happen is they send a letter questioning it - to which you respond with whatever documents you have and the reasoning behind it.  I've never seen a letter asking for how basis was determined.  I know of one such letter, but it was sent back in the 70's and involved inherited stock.  YMMV.