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Need8601
Returning Member

How do I report the non-taxable loss on Form 8949 from the HPE to Micro Focus spin-merger in TurboTax Premier?

I received 1099-B form from my brokerage on HPE – Seattle Spinco – MFGP spin-merger.  The 1099-B says I report on form 8949.  My question is: how do I complete 8949 when I have a loss which is non-taxable and cannot be recognized?

A CPA says the following.

For the exchange from Seattle Spinco Inc. to Micro Focus International (MFGP), the corporate action has been processed according to information received from the company. The information provided indicates that the transaction is taxable if it results in a gain but non-taxable if it results in a loss.  The gain or loss is calculated by comparing the basis of the shares of Seattle SpinCo, Inc. (Cusip ...) to the fair market value of the new shares of Micro Focus International (MFGP: Cusip ...) (the FMV on 9/1/2017 is $29.34). If this results in a gain, the gain is taxable and is reflected in the 2017 realized section. If the calculation results in a loss, it is non-taxable. The cost basis where a gain is recognized, is the Fair Market Value of Micro Focus International (MFGP). The cost basis where the loss is recognized, is the cost basis originally allocated to Seattle SpinCo Inc.

I also found the following PDF.

http://investors.hpe.com/~/media/Files/H/HP-Enterprise-IR/documents/seattle-6045b-statement-26092017...  says “U.S. shareholders will be required to recognize gain (but not loss)” in section “Tax Treatment of the Distribution and Merger”.

Tax Treatment of the Distribution and Merger. On August 31, 2017, HPE received an opinion of counsel from Skadden, Arps, Slate, Meagher & Flom concluding, based on certain representations of HPE and Seattle with respect to (among other things) the activities of HPE and Seattle following the Distribution, that the Distribution “will” qualify as a reorganization within the meaning of sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the “Code”), and that the Merger “will” qualify as a reorganization within the meaning of section 368(a)(1)(D) of the Code, subject to the application of the gain recognition provisions of section 367(a)(1) of the Code. As a result, you generally do not recognize gain or loss for U.S. federal income tax purposes on receipt of the Seattle Class A common stock in the Distribution, but U.S. shareholders will be required to recognize gain (but not loss) on the exchange of their Seattle Class A common stock for Micro Focus ADSs. In addition, if you received cash in lieu of fractional shares, you may recognize taxable gain or loss as described below.


1 Best answer

Accepted Solutions
TomYoung
Level 13

How do I report the non-taxable loss on Form 8949 from the HPE to Micro Focus spin-merger in TurboTax Premier?

Generally what you do when you have a loss that cannot be recognized you set your basis equal to the proceeds and Voila!, you've reported the sale and not recognized a loss.

You can recognize a gain or loss however on the sale of the fractional share.

Tom Young


View solution in original post

4 Replies
TomYoung
Level 13

How do I report the non-taxable loss on Form 8949 from the HPE to Micro Focus spin-merger in TurboTax Premier?

Generally what you do when you have a loss that cannot be recognized you set your basis equal to the proceeds and Voila!, you've reported the sale and not recognized a loss.

You can recognize a gain or loss however on the sale of the fractional share.

Tom Young


View solution in original post

Need8601
Returning Member

How do I report the non-taxable loss on Form 8949 from the HPE to Micro Focus spin-merger in TurboTax Premier?

@TomYoung Thanks.  When will this situation arise that shareholders will be required to recognize gain (but not loss) per the above PDF?  It does not seem to be fair to  the shareholders.
TomYoung
Level 13

How do I report the non-taxable loss on Form 8949 from the HPE to Micro Focus spin-merger in TurboTax Premier?

Certain mergers, (not all), where proceeds are received in both cash and stock, a particular rule - Sec 368, the "boot rule" - is applied and these situations dictate the gain/not loss accounting.  In this case a different rule - Sec 367 - was in play involving sale to a foreign corporation.
Need8601
Returning Member

How do I report the non-taxable loss on Form 8949 from the HPE to Micro Focus spin-merger in TurboTax Premier?

@TomYoung Why does TurboTax Premier generate "Form 8949 (Copy 1)" instead of "Form 8949" for me?  Is it possible for me to get "Form 8949" as "Form 8949 (Copy 1)" looks odd?

Although both say "Form 8949 | Sales and Other Dispositions of Capital Assets", "Form 8949" from <a rel="nofollow" target="_blank" href="http://www.irs.gov">www.irs.gov</a> has columns A through H lined up from left to right.  TurboTax "Form 8949 (Copy 1)" has columns A, B, and C sitting on top of D through H, thus making it more difficult to read the dates and dollars.
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