AT &T spin-off of the Warner Media Business into Warner Bros Discovery, Inc.

[bobqsup]

As a result of the spin-off of the Warner Media Business from AT&T Inc.  (“AT&T”), and its combination with Discovery, Inc (“Discovery”), which was renamed Warner Bros Discovery, Inc. (“WBD”).

Stockholders that held AT&T common stock as of April5, 2022, the distribution record date, and did not sell their rights to receive WBD common stock before April 8, 2022, the distribution date, received 0.241917 shares of WBD common stock for every share of AT&T common tock they held, except that no fractional shares of WBD common stock were issued and stockholders of AT&T common stock as of the distribution record date that would otherwise have been entitled to fractional shares of WBD common stock received cash in lieu of such fractional shares of WBD common stock.

If you were entitled to receive cash in lieu of a fractional share of WBD common stock, the enclosed check represents such cash.

How do handle this transaction?

[ThomasM125]

You would report the proceeds as a sale of investment. You may receive a form 1099-B reporting the proceeds which may list a cost value. Otherwise, you will need to calculate it or enter $0 for it in TurboTax. Folllow these steps to report your investment sale in TurboTax:

1. Choose the Federal option on your left menu bar
2. Choose Wages & Income
3. Choose the Investments and Savings (1099-B, 1099-INT, 1099-DIV, 1099-K, Crypto) option
4. Choose the Stocks, Bonds, Mutual Funds option
5. Enter your Form 1099-B or investment sale information

[bobqsup]

I am not sure if this was the correct response.  I did not sell any stock.  No 1099-B was issued.  

Further inquiry into this issue at www.computershare .com/wbd (which issued and holds the stocks for both companies) stated the following FAQ:

What are the U.S. federal income tax consequences of the Transactions for AT&T and Discovery stockholders?  

For AT&T stockholders: The distribution and the merger were a Reverse Morris Trust-type transaction and are expected to be tax-free to AT&T stockholders for U.S. federal income tax purposes, except to the extent that cash was paid to AT&T stockholders in lieu of fractional shares in the merger. You should consult your tax advisor as to the consequences of the Transactions to you, including the applicability and effect of any U.S. federal, state, and local tax laws, as well as foreign tax laws, which may result in the Transactions being taxable. •

As an AT&T stockholder, it seems that I am only responsible for the cash paid for the fractional shares? 

[ErnieS0]

Yes. You would report the cash in lieu on your tax return. Keep in mind, although the amounts may be small, they do have a cost basis since they are fractional shares, i.e. you would not pay tax on the whole amount.

If your shares are being held by Computershare you should be able to find a 1099-B or gain/loss info there.

Your AT&T share basis for the remaining shares would be split between your existing T shares and new WBD shares.

AT&T has an online calculator to calculate the allocation of your cost basis between AT&T Inc. and WBD common stock.

See Cost Basis Guide