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posted Jun 1, 2019 11:00:54 AM

How do I determine cost basis for RSU/ESPP during cash/stock exchange acquisition?

I have vested RSU/ESPP SanDisk stocks, and then acquired by Western Digital in 2016 with $67.5 in cash and remaining exchange of 0.2387 shares of WDC stocks at $36.74. How do I determine the cost basis for these WDC stocks when sold?  Is it $36.74 per share?  Is there a difference between RSU or ESPP?

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Level 13
Jun 1, 2019 11:00:55 AM

"How do I determine the cost basis for these WDC stocks when sold?"

The SanDisk/Western Digital deal was a "fully taxable" transaction meaning that you simply subtracted the basis of your SanDisk stock from "proceeds" where the proceeds was the combination of cash and stock (at fair market value) received.  If you did that correctly then the basis of the WDC stock received would be that same "fair market value".  If $36.74 was the number used for the FMV of the WDC stock then that's your basis in the WDC stock.  Your holding period reset too, starting the day after the merger occurred.


"Is there a difference between RSU or ESPP?"

Stock received via an RSU always has an original basis of the FMV at vesting and thereafter is simply plain-vanilla "stock", stock that's no different than a stock purchased through your broker.  In other words it isn't, (and never was) "RSU stock" in the sense that it had some special handling required when it was sold.  And your WDC is also just "stock".

On the other hand stock received via an ESPP does need some special handling when it's sold.  That's because the sale of such stock can create reportable compensation income and that compensation is added to the stock's "out of pocket" basis.  But since you presumably handled all that in your accounting of gain/loss on the SanDisk/Western Digital transaction, the WDC stock received for the shares acquired via the ESPP also have no "special status" requiring any special handling when sold.  Those shares too are simply "stock".

Tom Young

1 Replies
Level 13
Jun 1, 2019 11:00:55 AM

"How do I determine the cost basis for these WDC stocks when sold?"

The SanDisk/Western Digital deal was a "fully taxable" transaction meaning that you simply subtracted the basis of your SanDisk stock from "proceeds" where the proceeds was the combination of cash and stock (at fair market value) received.  If you did that correctly then the basis of the WDC stock received would be that same "fair market value".  If $36.74 was the number used for the FMV of the WDC stock then that's your basis in the WDC stock.  Your holding period reset too, starting the day after the merger occurred.


"Is there a difference between RSU or ESPP?"

Stock received via an RSU always has an original basis of the FMV at vesting and thereafter is simply plain-vanilla "stock", stock that's no different than a stock purchased through your broker.  In other words it isn't, (and never was) "RSU stock" in the sense that it had some special handling required when it was sold.  And your WDC is also just "stock".

On the other hand stock received via an ESPP does need some special handling when it's sold.  That's because the sale of such stock can create reportable compensation income and that compensation is added to the stock's "out of pocket" basis.  But since you presumably handled all that in your accounting of gain/loss on the SanDisk/Western Digital transaction, the WDC stock received for the shares acquired via the ESPP also have no "special status" requiring any special handling when sold.  Those shares too are simply "stock".

Tom Young