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Level 3
posted Apr 4, 2022 9:32:43 PM

Cost basis for partially vested stocks exchanged after merger

I have been searching online but cannot find any cases that were similar to my situation.  I am trying my luck here, hoping someone more experienced can give me some hints. 

 

Let's say

  • 8 years ago, I joined a startup company (A) and paid $100 to early exercise 1000 shares of ISOs (with 83b filed within 30 days);
  • 6 years ago, Company A was acquired by another startup company (B) and the 1000 shares of A stock were exchanged for 100 shares of B stock.  An early exercise of the 100 shares of B stock was done without any cost from my side and 83b was filed within 30 days. 
  • 4 years ago, I left Company B and by the time 60 shares of B stock were vested.  The 40 unvested shares were not repurchased by Company B.
  • Last year, I sold the 25 vested shares of B stocks. 

What would be my cost basis for the 60 vested shares of B stock sold last year? Should it be $100 or $100x60/100=$60?  For the 40 unvested shares of B stock, can I report the proportional cost before the merger ($40) somewhere as a loss?

 

Any information will be highly appreciated!  Thanks!

0 3 495
3 Replies
Expert Alumni
Apr 5, 2022 7:31:30 AM

The cost basis for the first 100 shares of B stock which you had by exchange of the A shares is $100 or $1 per share of B stock.

 

The other 100 shares of B stock which you exercised for $0 cost have a cost basis of $0. The 60 shares which vested have a cost basis of $0. You do not claim a loss for the 40 shares which did not vest as your cost basis is $0.

Level 3
Apr 5, 2022 11:10:11 AM

Highly appreciate your prompt response!  Thanks for your time and help!  Sorry that I didn't make it clear.  The 100 shares of B stock that were early exercised were exactly the 100 shares of B stock exchanged from the 1000 shares of A stock.  The vested shares which were sold later were out of the 100 exchanged shares of B stock.  Will this change the answer?

Level 3
Apr 8, 2022 11:59:00 PM

Thanks again for your response!  Do you mind answering a follow-up question? For the unvested stocks, what if the company repurchased them? Do I need to report the gain/loss from the repurchase?