How to report cost basis or realized gain(loss) from Baxalta merger when origional stock purchashed was Baxter

[Bruce800]

Hi I received a 1099-B with a transaction dated 6/3/16 for Baxalta (merger) saying I sold 1,152 shares with proceeds of $52,042. The cost basis and gain are not listed as the original purchased stock was Baxter from Dec 1, 2001. Can you please help me with how I should be reporting the cost basis and gains? Thanks!

[TomYoung · Accepted solution]

I have addressed the Baxalta / Shire transaction here:

https://ttlc.intuit.com/questions/3814587-can-you-help-baxalta-shire-merger-cash-and-stock

The transaction is fully taxable and you use the sum of cash plus FMV of the stock as "proceeds" to determine your reportable gain or loss.  It's "as if" all the proceeds were paid to you in cash and then you used some of the cash to buy Shire stock.  Your holding period in your "new" stock starts the day after you received it.

Since you know the date of the purchase of your Baxalta stock I assume you know the cost basis too.  The sale is being reported to you, I assume, as a Box E (or maybe Box X) trade which is saying that the cost basis is not being reported to the IRS.  So when you enter the 1099-B you simply enter the cost basis from your own records at the same time, coming to a resulting gain or loss.

Tom Young

[Bruce800]

Thanks @TomYoung -I did more digging at looks like Baxter was at $29.13 on Dec 1st, 2001. I had 1,152 shares of Baxalta sold in the merger, so $29.13 X 1,152= $33,557.76 should be my cost basis, correct?

When the merger happened I received $18/share and +.1482 shire stock to baxalta so:
$18 X 1,152=$20,736 in cash + 1,152 X .1482=170.72 shares of shire @ $190.04 =$32,444.84
$20,736 + $32,444.84 = $53,180 in proceeds sent to IRS

Reportable gain should be $53,180-$33,557.76= $19,623, correct?

Thanks!

[TomYoung]

"I did more digging at looks like Baxter was at $29.13 on Dec 1st, 2001. I had 1,152 shares of Baxalta sold in the merger, so $29.13 X 1,152= $33,557.76 should be my cost basis, correct?"

I wouldn't think so, no.  12/1/2001 was a Saturday so not a trade or settlement date.  The 11/30/2001 H/L/C for Baxter were $28.36 $27.95 $28.25

But Baxalta was spun off from Baxter which means you need to allocate your Baxter basis between Baxter and Baxalta;
44.8 % to Baxalta and 55.2% to Baxter.  You can't take whatever price you paid for Baxter and apply all of that to Baxalta.

"$53,180 in proceeds sent to IRS"

Not sure why your proceeds and the broker's proceeds are so different - you may want to ask - but I'd think you would need to use the broker's figure.

[Bruce800]

Thanks @TomYoung. Using the $28.25 close price of Baxter from the original purchase are you able to help me with the cost basis I should be using? All these splits and mergers start to get confusing!! Thank you!

[TomYoung]

You allocate 44.8 % of your original Baxter basis to Baxalta and 55.2% of your original basis to Baxter.

[Bruce800]

@TomYoung so if original Baxter basis is 1152 shares X $28.25 = $32,544
Baxalta basis would be $14,579.71 ($32,544x.448)
Baxter basis would be $17,964.29 ($32,544x.552)

This may be a silly question but how do I now enter into TurboTax. Am I supposed to enter two separate entries? I just have the one Baxalta Incorporated item on my 1099-B showing the merger with Shire and proceeds of $53,042.80. Any help on how to enter correctly would be much appreciated. Thank you.

[TomYoung]

"Am I supposed to enter two separate entries?"

No.  You are simply selling your Baxalta stock, not your Baxter stock.  The basis you calculated for your Baxalta stock is the basis you report against the cash plus stock "proceeds".

[Bruce800]

OK thanks @TomYoung , so the lone entry for the shire merger entry should look like the following?

$14,579.71 cost basis and $53,042.80 in proceeds for a reportable gain of $38,462.09?

[TomYoung]

I still question the proceeds if your broker reported something different.  Follow up with the broker

[Bruce800]

will do in the morning Tom, but is the above correct now for reporting (assuming proceeds are correct)

[TomYoung]

Given the assumptions of cost it does look logical.

[Bruce800]

@TomYoung I just realized something that neither of us had factored in. The 1152 shares are not the origional amount from 2001, they are the amount since 2011 when my broker first started tracking (without a base cost). From 2001-2011 there were dividends reinvested the entire time and I am uncertain of the starting amount of shares.