My ESPP shares of Infinity IPCC got converted to cash and stock due to a merger with Kemper (KMPR).

[bijurk]

My ESPP shares of Infinity IPCC got converted to cash and stock due to a merger with Kemper (KMPR). Each IPCC share was converted to $49.58 cash and 1.2332 shares of KMPR. I got two 1099-Bs; one for the cash portion and the other for the stock which I have not sold. When reporting the cash segment using the Guided portion, it seems to show that I have incurred a loss and therefore boosts my returns. This is because the stock transaction in the other 1099-B shows the stock portion which I'm unsure if I should report given that I have not sold them. The second 1099-B form states that the "proceeds" have been reported  to the IRS and shows as a "Non-covered" security. I'm wondering if I should book the cash transaction as a loss for this year and set the cost basis of the stock that I continue to own at $0 to compensate for the loss taken and pay the tax later when I actually sell the converted stock.

[TomYoung]

"and the other for the stock which I have not sold."

A 1099-B reports a SALE, as sale of the Infinity IPCC stock.  I assume what you're saying here is that you got 2 1099-Bs for you sale of Infinity IPPC, one for the cash received, ($49.58) x (# of infinity shares sold), and another for the stock received, (1.2332*) x (# of infinity shares sold)?  Was the second 1099-B showing proceeds in "shares" or the $ value of the shares.


* Are you sure about this number?  Everything I read indicates the number is 1.2019, not 1.2332.

[bijurk]

1.2332 comes directly from my 1099-B; 100 IPCC became 123.32 KMPR and the fractional .32 was also converted to cash. It does show the $ figure which has me confused as that converted stock still exists in my brokerage account and it's not sold.

[TomYoung]

What's the name in Box 1a?  Infinity IPCC?  Or Kemper?

[bijurk]

Thanks very much for clearing this up for me. I have been researching all over trying to figure out what's the best way to handle this. This did inflate my taxes as expected, but then it books the transaction correctly. I just need to hold on to the second 1099-B for my cost-basis for the surviving KMPR shares.
Once again, thanks for your efforts in researching this for us.

[TomYoung · Accepted solution]

What's the name in Box 1a?  Infinity IPCC?  Or Kemper?

I guess you elected the "stock consideration" which did use that 1.2332 per share figure and the $49.58 in cash.

I assume that the second 1099-B doesn't report the SALE of Kemper, but is simply reporting the "stock" portion of the proceeds of your sale of Infinity.

This tax letter:

http://investors.kemper.com/Cache/1500111778.PDF?O=PDF&T=&Y=&D=&FID=1500111778&iid=103308

states that the transaction was a FULLY TAXABLE transaction meaning that you use the SUM of the cash received plus the fair market value of the stock received as the "proceeds" of the sale, subtracting your basis in the usual fashion and coming to a resulting gain or loss.  It's "as if" you sold your Infinity stock ENTIRELY for cash and then immediately decided to use some of that cash to by some Kemper stock.

ASSUMING, for simplicity, that you had exactly one lot of Infinity stock you'd simply report one sale with the proceeds of that sale being the sum of the proceeds shown on both 1099-Bs.  Don't worry that you're not reporting "two" 1099-Bs.

Tom Young

[bijurk]

Thanks very much for your answer.
I did choose a mixed consideration, so they did sell a segment of my holding as cash and converted the rest as per the stated 1.2332 per share figure and the $49.58 in cash. A fractional segment was also converted as cash.

[TomYoung]

Yes, fractional shares are seldom issued.  They are settled as "cash in lieu" (CIL) which is the proceeds of the fraction of a share sold.  You can deduct an appropriate amount of basis for this particular "sale".