Investors & landlords

"I think I have the cost basis worked out, but any insight on whether turbotax will estimate the cost basis and cost basis allocation starting from a known basis for the EMC Shares would be helpful. "

It absolutely will not.  TurboTax will accept your input as to basis either as "so many shares bought for a total of $XX" or as "so many shares bought at a per share price of $XX", and that's pretty much it.  The only exception to TurboTax actually assisting in the calculation of basis pertains to employer stock incentive programs, (RSU's ISO's, ESPP's, etc.), accessed by dropping down into the step by step interviews.

"My understanding this merger is considered almost two parts: (1) Cash to boot stock merger with cash; and (2) Merger with tender / stock issuance."

I'm not sure I understand what you've said there.  Per the Form 8937 issued by Dell they are recommending a two-part treatment of the transaction consisting of:

• a Section 351 exchange for the Dell stock received and the portion of the cash provided by Dell
  
• A redemption of EMC stock for the cash provided by EMC

Dell believes that 86.77% of each EMC Share should be treated as exchanged in the Merger for $20.17 of cash and 0.11146 shares of Class V Common Stock subject to the Section 351 treatment.

SECTION 351

Here's the general rundown of how you handle Section 351 exchanges.  TurboTax doesn't "natively" handle Section 351 exchanges so you must do all your calculations here outside of TurboTax to derive how you'll report the sale of this part of your EMC stock

1. For EACH LOT of your stock that you gave up you need to determine gain or loss based on the "proceeds" of the sale (cash per share + FMV of stock received) vs. your basis in that lot. 
   
2. Losses are NOT recognized in your tax return, they do not offset gains on "gain" lots.
3. Gains ARE recognized but only up to the LESSER of cash received or the gain as calculated per 1 above.
4. Accordingly you need to derive the basis to use against the reported cash proceeds to come to the gain - if any - you have determined.  If you have a loss clearly basis is equal to the proceeds in order to report "no loss".
   
5. For each lot your basis in the stock of the new company is: Basis in lot of old company tendered - cash received + gain recognized.
6. The holding period of the each lot tendered of the old stock carries over to the new lot received of the new stock.
7. You then attribute, proportionally, basis from each lot of the acquired company to the fractional share and and RECOGNIZE gain or loss on the CIL transaction.

Dell has recommended using $47.20 as the per share fair market value of the stock received. Under this approach, the value of 0.11146 of a share of Class V Common Stock is $5.26.

REDEMPTION

Here is Dell's statement for the "Redemption" aspect of the transaction:

"The remaining 13.23 percent of each EMC Share should be treated as redeemed by EMC in the Merger for $3.88 of cash (i.e., the Redemption). An EMC shareholder who received cash in the Redemption should generally recognize capital gain or loss equal to the difference between the amount of cash received in the Redemption and such EMC shareholder’s tax basis in the 13.23 percent of each EMC Share treated as redeemed in the Merger.

So, to make life simple by assuming you just had one lot of EMC, you'll "essentially" report the sale twice, once for the Section 351 component and once for the redemption component.  I put essentially in quotes since, mechanically, there would be nothing incorrect or wrong by figuring out your Section 351 treatment and your Redemption treatment and then simply slapping them together and reporting this as only one sale in TurboTax.  Too, you'll probably want to wait until the 1099-B for this sale is in your hands - late February most likely - since I'm sure there will be some information on that form that might be helpful.

Tom Young