Thanks Tom
I was also leaning towards line 3 as well but I still can't fathom how the IRS knows that in addition to the $5864.60 (Cash portion reported on the 1099B) I also received new stock in the new company of $2504.44, which doesn't appear to be accounted for other than I was taxed on the FMV of my original shares which was $8369.03. I should say that I haven't sold the the new stock in the new company and they have been converted to common stock to the value of $2504.44.
Regarding where did the cash payment originate, I have attached a summary of the broker transaction below:
| Award Type | Restricted Stock Award |
| Award Date | 3/1/2019 |
| Vest Date (Merger Date) | 11/21/2019 |
| Election Method | Cash |
| Shares Vested | 497 |
| Fair Market Value Per Share | $16.8391 |
| Taxable Income 497 x 16.8391 | $8,369.03 |
| Taxes | |
| Federal | 1841.19 |
| State | 292.92 |
| Local | 175.75 |
| FICA Medicare | 121.35 |
| Total Taxes | 2431.21 |
| Fees | 0 |
| Gross Proceeds = Taxable income minus Total Taxes and fees |
| Gross Proceeds Reported on 1099B Box 1d (497 x $11.80) | 5864.60 |
| Net Proceeds = Gross proceeds minus Taxes and Fees | |
| Net Proceeds - Check issued | 3433.39 |
| | |
| Note Cash Portion at merger =497 x 11.8 | 5864.6 |
| Note New Stock Portion at Merger = 0.1612 x 497 x 31.26 | 2504.44 |
| | 8369.04 |
