1099-B for REIT merger.

[woerden]

In 2012, I started investing in a REIT with two separate purchases and dividend reinvestment.  In October of 2019, the REIT merged with a new REIT.  I received new shares in the new REIT plus they paid $1 for each old share.  I received a 1099-B for the merger.  On the 1099-B it lists under 1a Cash Merger Consideration under Transaction.  1e (Cost or other basis) is left blank.  (5) Non-covered security is YES.  Notation indicates cost basis method not reported to IRS.  How do I determine Cost or other basis for this transaction?  

[DavidD66]

I recommend you go to the Investor Relations page of the new REITs website.  They should have specific information on the tax treatment of the merger.

[woerden]

I called the REIT and the only thing they could provide was that the 1099-B was for return of capital.  So, do I even have to report this form.  She did refer me to IRC Sec 368(a)(1)(A).  That just explains the merger.  I did look at the Form 8937 filed by the REIT.  Part ll (15) states the shareholder will recognize gain (but not loss) in an amount equal to the lesser of (1) the amount of gain realized (I.e. the excess of the sum of the amount of cash and the FMV of the common stock surrendered) and (2) the amount of cash received pursuant to the merger.  If a shareholder acquired different blocks of common stock at different times or different prices, any gain must be determined separately for each block of common stock.  The shareholder would reduce the adjusted basis for any monthly distributions received during 2019 that will be treated as a return of basis under IRC Section 301(c)(2).  As part of the merger, I received $1.00 per share and .4681 share of the new REIT share for each of the old shares, par value $.01 per share, for a total merger consideration of $5.33 per share of old REIT shares.  This is all Greek to me.

[DaveF1006]

Form 1099-B - Return of Principal Return of Capital. ... However, if the return of capital or principal is more than your basis, then you will need to report a capital gain equal to the amount received in excess of your basis. If you originally paid $1 per share and each share is worth $5.33 per share, then you would need to report this as a capital gains.  Here is how this would work.

if you have 100 shares.  if you originally paid $1 per share, your basis is $1 X 100=$100    Now your 100 shares are worth $533 ($5.33 X 100).

Your capital gains now is $433 ($533-100), which needs to be reported.

[tarheelmes]

Same exact situation. Appears to be the same REIT. No idea how to calculate basis for the 1099-B. Need some help! I use Quicken to track investments but it does not properly handle REITs so it's no help. I paid $10 a share and the 1099-B shows the 'sold' price as $1.00 per share so do I report a loss of $9.00/share even though the 1099-B is ROC?

[DawnC]

If it is the same merger as woerden references above, no loss is recognized.    As David suggests above, you should look up the new REIT's website for specific reporting information for your unique situation.   TurboTax Premier will guide you through entering the transaction and making any needed basis adjustments.  

@tarheelmes

[tarheelmes]

In my case, I originally bought 1000 shares in 2012. I adjusted the original basis ($10,000) by the amount of ROC received from 2012 through 2019. Prior to the merger the adjusted basis was $4,924.78. The merger paid $5.33 per share for a total of $5,333.00. Therefore, I believe I need to report a gain of $405.22 ($5,333.00-$4,924.78).

After countless hours of research, because of your explanation, I think I may finally understand it! Many thanks. If by chance I misunderstood your explanation, please let me know. Before this research I did not realize I needed to adjust the basis by ROC received. BTW, for anyone in a similar situation, the easiest way to determine the ROC (aka nondividend distributions) received each year is to look at each 1099-DIV received each year since your original purchase. Luckily, the commodity I was dealing with had all of them readily available for my account on their website.