In 2018 I received $53.75 for each Time Warner share and 1.4 shares of AT&T. The share payout is now reported on my 1099 as a gain. How can I calculate my cost basis?

[ulib]

I am considering just writing $0 as my cost basis. After all I only had a small number of Time Warner shares to start with. Suggestion?

[raffinir]

RE: TWX merger with T:  In my Schwab account for the new ATT shares (T),   I can click on the 'Basis' information and see all of the price info since AOL merged with Time Warner in January of 2001. (I've owned the shares since TWX was AOL).   I called Schwab about the $0 listed as my basis on a gain of some $4,000 on the form 1099B. There are 2 other entries for part shares of the Time Warner sale that give a high basis and low net gain.   The Schwab Rep, after talking to her Basis folks, could not explain the $0 basis with the higher gain except to say that they only had to report info to the IRS basis from 2011. They suggested that I contact a tax advisor. Ugh!  

 When I changed the $0 basis to what's listed in my Schwab  basis history from 2001, TurboTax popped up some other questions related to the 1099 B that look troublesome. It's looking for numbers from box 1f of Accrued Market Discount, that don't apply.  I'll keep trying it anyway.

[CynthiaR]

It might be worth it to find the costs of those stocks.  You could have a capital loss which would help reduce your taxable income and generate more refunds.

Here are some suggestions:

Ask your broker for some help. Brokers must keep records for six years, and some go back further (although you may have to pay a small fee to receive a duplicate statement).

If your broker doesn't keep records that far back, try to remember when you bought the shares and see what they were selling for then. A stock certificate might be dated or old tax returns might show when you began reporting dividend income. Then look up historical price quotes. If you can narrow down the purchase period to a few months, use the average price during that time as your basis and keep records of your methodology.

BigCharts is a great source for historical price information, but their records only go back to January 1985.

[nwhysee]

I'm in the same boat.  I'm not positive on the answer, but I believe the cost basis of zero that you're seeing for the cash received is actually correct.

If you look at the information forms shared with investors by ATT (https://investors.att.com/~/media/Files/A/ATT-IR/documents/stockholder-services/time-warner/TWX%20Sh...), you'll find a long legalese description that says:

"Your gain from this transaction (if any) will generally be the smaller of the following amounts: (a) the amount by which the sum of cash and the fair market value of the AT&T shares you received exceeds your tax basis in your Time Warner Inc. shares or (b) the amount of cash you received in exchange for your Time Warner Inc. stock (in each case treating any cash received in lieu of a fractional AT&T share as if such fractional AT&T share was actually received and then sold for cash as described below)."

I think the net result of the above for most people is that (b) applies and your gain is the full amount of cash paid, so you'll see a zero basis on your brokerage statement.  

But you're being paid out cash--shouldn't that reduce your basis in your resulting ATT stock? The section that says:

"The tax basis in your newly acquired AT&T shares (including any fractional AT&T shares) will generally equal the tax basis in your Time Warner Inc. shares less the cash you receive as part of the exchange ($53.75 per Time Warner Inc. share and excluding cash received in lieu of a fractional AT&T share), plus the amount of any gain recognized from the transaction (excluding any gain recognized with respect to a fractional AT&T share)."   

So, if (b) applied to you above and you're recognizing a gain on all the cash paid out, then this section has you first subtract out that cash and then add it back in.  You end up received cash that is all gain, but maintaining the same basis in your ATT stock as you had in your Time Warner stock.

You mentioned some additional entries showing high basis and low gain--not sure how to explain that, but you might look at whether these represent payouts on fractional shares in ATT that would have resulted from the merger in your situation.

[fanfare]

use the "Search the community" box for this event, where the actual calculation has probably already been described in detail.

[racquetball_play]

I think the AT&T legalese assumes the AT&T price is Higher than the original purchase price of the Time Warner stock or AOL.  However, we bought AOL when it was quite high, and this merger value is a loss for us because of the low price of AT&T.