I received a 1099-B for Solventum stock after it was spun off from 3M. There is no cost basis listed. Should the cost basis & purchase date I enter be for the 3M stock?

[ktax2]

This is on the 1099-B: "Box 5: Non-Covered Securities Transactions for which basis is not reported to the IRS and for which short-term or long-term determination is unknown by EQ Shareowner Services. You must determine short-term or long-term based on your records and report on Form 8949, Part I with Box B checked, or on Form 8949, Part II, with Box E checked, as appropriate." I've had the 3M stock since 10/6/2000 = long-term for 3M. And I know the 3M cost basis. Are these (3M info) what I enter for the 1099-B?

[JamesG1]

Yes, you will enter the date of purchase and cost basis from your personal trade records.

A noncovered security means a broker is not required to report the cost basis of that security to the IRS.  The adjusted cost basis of noncovered securities is only reported to the taxpayer, not to the IRS.  For noncovered securities, you are responsible for reporting cost basis information to the IRS when you file your taxes.

In TurboTax Online, follow these steps to enter the IRS form 1099-B.      

1. Down the left side of the screen, click Federal.
2. Down the left side of the screen, click Wages & Income.
3. Click the down arrow to the right of Investments and Savings.
4. Click to the right of Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).
5. Click Add investments.

[ktax2]

I wanted to make sure it was the cost basis and date for the parent company (3M) I needed to enter and NOT Solventum (spinoff), since TurboTax was questioning me after I entered the 3M numbers because I checked that the "cost basis was missing or incorrect" and then entered my 3M information.

If the questioning by the TurboTax software is normal and does not indicate a problem, then I'll keep the entries as I've done them, with the info for 3M.

Thanks!  

[JamesG1 · Accepted solution]

Sorry that I was unclear.

Since the IRS form 1099-B is reporting the disposal of the Solventum stock, you should refer to the Solventum stock information.  The purchase date would be the date that the date that the stock was spun-off by 3M, not the date that you purchased the 3M.

Solventum basis is different.  If you paid $100 for one share of 3M, your cost basis in 3M is $100.

After the spin-off, you may one share of 3M and one share of Solventum and your cost basis is still $100.  The only issue is how you allocate the cost between the two stocks.

At the time of the spin-off, shareholder services information would have revealed the relative values of the two stocks at the time of the spin-off.  

As an example, if one share of Solventum was considered to be worth one share of 3M, your original cost basis would now be $50 Solventum and $50 3M equals the $100 cost basis of the original 3M share.

[ktax2]

Thank you so much for clarifying that. I understand how to do the cost basis. (It was 1 share of Solventum for every 4 shares of 3M.)

For the date: The date of the distribution (4/1/2024) on my 1099-B is the same date as the stock was spun off (4/1/2024). I changed the date info for my 1099-B in the TT software, and so far it seems fine.

Thanks again.

[baha]

I am having difficulty with this also. We inherited our 3M stock well over ten years ago. Our 1099-B for Solventum does not look like the TT examples, though it sounds similar to the original poster's here. TT asks how we received the investment, and none of the answers cover it being a spinoff. It is also flagging my empty cost basis (Box 1e)

[JamesG1]

You inherited the 3M stock and cost basis of the 3M stock is explained as follows.  Per IRS Publication 551 (page 15), the basis of property inherited from a decedent is generally one of the following.

1. The fair market value of the property at the date of the individual's death.
2. The fair market value on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. 
3. The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. 
4. The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement.

Since the Solventum stock was spun-off and not inherited, Something else or I purchased it may be the best choices for the question How did you receive this investment?

If you paid $100 for four shares of 3M, your cost basis in 3M is $100.

After the spin-off, you have four shares of 3M and one share of Solventum and your cost basis is still $100.  The cost allocation would be four shares of 3M $80 and the one share of Solventum would be $20.  

1. At the screen Look for your sales on your 1099-B, select Continue.
2. Enter the information.  Select The cost basis is incorrect or missing on my 1099-B.  Continue.
3. At the screen We noticed there's an issue with your cost basis, select I know my cost basis and need to make an adjustment.  Continue.

@baha 

[baha]

Thank you, let me see if I got it:

I believe the 3M price when I inherited it was $43.75. So the cost basis of four shares is $175. The cost basis for one share of Solventum is one fifth of that, or $35

[JamesG1]

That is the computation that I would use.

@baha 

[JayCPA]

To clarify information previously given:
The stock obtained in the non-taxable spin-off reorganization maintains the characteristics of the original company's stock.  Thus the ACQUISITION date for Solventum remains the SAME as the acquisition date for 3M, and the ACQUISTION method remains the same - purchase, if 3M was purchased, or inherited, if 3M was inherited.

It is true that the BASIS of the old 3M is allocated between the 2 new holdings.  But it is NOT on an equal per share basis.  Rather, the number of 3M shares remains unchanged, and has the basis of 84.48% of the previous basis.  The number of Solventum shares is 1/4 of the number of 3M shares, and has the total basis of 15.52% of the previous basis.  (These percentages are a composite of allocation numbers I have seen; they vary from source to source, but never by as much as 1/4 of 1 percent - presumably because of differing stock prices of Solventum and 3M at different points during the day of the split, which prices are the means for determining the allocation percentages.)

One site that discusses the matter is: https://www.iclub.com/faq/Home/Article?id=801#gsc.tab=0

Again, the Solventum acquisition date is the SAME as the 3M acquisition date, and the method of acquisition of Solventum (e.g. purchase, inherit, etc.) is the SAME as the method of acquisition of 3M.