How to report cost basis for stock spinoff of Dow Inc

[Mad Mark]

I received Cash in Lieu for a spin off of Dow Inc from Dow Dupont on April 4, 2019. Only the $ amount and date of the sale was listed on my 1099-B. no cost basis or date of acquisition. A quantity for this spinoff was given at the end of the 1099, not sure if that represents the number of shares or what.

According to the Dow Press release: https://www.dupont.com/news/dowdupont-completes-spin-off-of-dowinc.html

"DowDuPont common stockholders received one share of common stock of Dow for every three shares of DowDuPont common stock they held as of the close of business on March 21, 2019. DowDuPont common stockholders will also receive cash in lieu of fractional shares of Dow common stock."

At first I thought it was inherited stock and entered the date of death and the cost basis on that day.

How do I calclulate the cost basis, is the acquisition date April 4, and how do I go back and correct my incorrect entry as inherited stock? I have not filed yet

[Anonymous_]

Refer to the information in the following links (the second is for the Lacerte software but explains the process).

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/i-have-a-form-a-1099b...

https://proconnect.intuit.com/community/help-articles/help/reporting-cash-in-lieu-of-stock-to-the-ir...

[Anonymous]

in a tax-free merger, your basis in Dow is the same as your basis in DowDupont. Many taxpayers skip allocating any of the cost basis to the fractional share sold.  however, if you wanted to the calculation would be as follows

cost basis of DowDupont divided by the shares (including any fractional shares received).  this gives you the new cost basis per share for  Dow.   multiply this by the fractional share received and you'll have its cost basis 

[Mad Mark]

Thanks for your reply, but I cant wrap my head around this.

On March 21, 2019 DowDupont was $167 per share.

and I received 1 share of Dow for every 3 shares of DowDupont.

So is my Cost basis for each share of Dow

$167 /3 = $55.7 ?

Thanks

[TomYoung · Accepted solution]

@Mad Mark 

"On March 21, 2019 DowDupont was $167 per share."

I'm not sure what this has to do with anything.  March 21, 2019 was the "record date" where if you owned DowDupont on that day then you were eligible to receive the spun- off Dow stock, but that doesn't factor into the basis calculation.  The calculation starts with your cost basis of your DowDupont stock and the number of shares of DowDupont you owned on that date, before the reverse split.

Take the number of shares of DowDupont you owned on that date and divide by 3.  That will give you the number of shares you were eligible to receive including the fractional share. 

Multiply your DowDupont basis by 0.33562.  That's your basis in the new stock received, including the fractional share.

Now, divide the basis derived for the new shares by the number of shares you were eligible to receive.  That's your basis per share in the new stock.

Multiply the fraction of a share you were eligible to receive by the "per share" basis number and you have the cost basis of the fractional share.