Partial distribution/Cash liquidation - box 9 1099 - how to report

[tax23948]

My situation is a tab bit different. I had several RSU and ESPP lots. I got the 1099-DIV with the liquidation reported in it. A few weeks later I then sold all shares. So I got a 1099-B for the sales. I also got a statement with adjusted cost basis which mostly show losses since the sale happened after the initial liquidation distribution. How do I report this? Do I report the 1099-B normally and adjust the cost basis based on the statement I was given? And do I add a new "sale" for the distribution in the 1099-DIV? If so, how do I report the gain/loss? Would I need to know my cost basis for each of the ESPP/RSU lots?

In summary, do I report the gain/loss for the 1099-DIV liquidation by figuring out the original cost basis for each ESPP/RSU lot, or do I just set the cost basis to $0 and count it all as gain, or do I set the cost basis to the total distribution amount to count non of it as gains; and do I report the gain/loss for the 1099-B using adjusted cost basis provided on the supplemental statement I received?

[EclatC]

@tax23948 Same situation as you, and I posted my question here and pending help & Clarification

[TaxPrepper]

@RT46 I have a somewhat similar situation to yours, in that I also received a 1099-B along with the 1099-DIV.

I received a 1099-DIV with the amount in Box 9 (Cash Liquid Distributions) that is equal to the number of shares I held x $51.50 sell price. Then I also received a 1099-B showing several sales of AABA on 9/23/19 along with the proceeds and date(s) acquired for each (these are all different vesting dates as the stocks were originally RSUs), however the total proceeds here is much less than the 1099-DIV amount. I did not sell any of these on my own; these sales all came from the liquidation distribution.

For all of these sales, the cost basis is listed as $0 and the quantity sold all show as 0. I am trying to figure out if indeed the cost basis should remain as $0 in this case or if I should lookup the price as of the date purchased.

Based on the below wording from Altaba's site, I am confused if the sales listed in the 1099-B represent the gain over and above my cost basis and hence why no quantity/cost basis is listed, making me responsible for taxes on the full proceed amount, or if these sales just make up a portion of the amount from the 1099-DIV and that I should be looking up my own cost basis for each of these to determine gain/loss. If the latter, why don't the proceeds from the 1099-B match the amount on the 1099-DIV? Why have I received a 1099-B when it seems that many others have not? Should I be concerned about these differences?

Basically has Altaba already determined my cost basis and factored this into the proceed amounts that have been listed in the 1099-B (hence why the proceeds are a subset of the full liquidation amount from 1099-DIV and there is no cost basis or quantity), or do I need to determine my cost basis for each?

@RT46 - does this sound like your situation? If so how did you handle?

@Rick19744  @DaveF1006  @KathrynG3 - Do you have any thoughts on this? Thanks in advance!

A liquidating distribution received by a U.S. stockholder will first be applied against and reduce the stockholder's adjusted tax basis in its Altaba common stock, before the stockholder recognizes any gain or loss. A U.S. stockholder will recognize gain as a result of a liquidating distribution to the extent that the aggregate value of the liquidating distribution and any prior liquidating distributions received by the stockholder with respect to a share exceeds the stockholder's adjusted tax basis in the share.

[Rick19744]

@TaxPrepper if you have not already done so, go back and review my initial responses and replies to the original question(s).  These will provide an overview of this situation.

1. Liquidating distributions should be reported on a 1099-DIV.
2. As noted on the website FAQs, the plan was to have multiple liquidating distributions.
3. You as a stockholder should know your stock basis.  Whether this was done in a self-directed brokerage account or something else, this is critical.  Altaba will not have this information.  The Company only knows how many shares you have.
4. Your italics discussion is exactly on point as to how the overall gain or loss will be determined.  The final gain or loss will not be known until you receive the last liquidating distribution.
5. In general, 1099-B's in these cases are not accurate so use those with caution.  Additionally, you need to pay attention to how the 1099-B is being reported.  There are sections that indicate the information has not been reported to the IRS, there are sections / references that indicate cost basis is not known.
6. Based on item 5, the key is to make sure you don't duplicate any gain or loss.  My recommendation is once you know your cost basis, compare this to the initial liquidating distribution.  As noted in my previous response, if your liquidating distribution is less than your cost basis, show the liquidating distribution and cost basis as the same for no gain or loss.  Remember to keep track of this as you will need to know what cost basis is remaining should you receive additional liquidating distributions.
7. As discussed in item 5, once you understand the presentation you will report as necessary.  If the items are not reported to the IRS, then don't include them on your return.  If the items are reported to the IRS, then show the various sales and then once again show cost basis equal to the sales proceeds.  I will state once again, you need to understand these two documents to avoid duplication of sales and any gain or loss.
8. Depending on the $$ involved, it may benefit you to consult with a tax professional on this particular matter.

[tax23948]

Hey @Rick19744 , any ideas on how to report my situation? I received the first distribution and a few days later sold all my shares. So now I have a 1099-DIV with the distribution info and a 1099-B with the sale info. I'm assuming I need to report the 1099-DIV as full capital gains and use the cost basis for the 1099-B.

[Rick19744]

This appears contrary to what is reported on their website?

In their FAQ's, they specifically state that once the Certificate of Dissolution had been filed, the shares cannot be sold.  However, they indicate the ability to transfer the right to future liquidating distributions.

So not exactly sure what is going on with you based on your stated facts.

Having said that, your situation is no different than what has been stated previously in my responses.  You need to make sure that you don't have any duplication.

So:

1. Step 1 is you need to know your stock cost basis.
2. Once you know your stock basis, you indicate that you received a liquidating distribution first.  You now need to subtract your cost basis from this liquidating distribution amount.  If you still have remaining cost basis in the stock, just report the liquidating distribution as the sales price and the same figure for the cost basis which will result in no gain or loss.  This represents a return of your capital.
3. If your 1099-B truly represents the sale of your shares, then you now report this as your sales proceeds and then the remainder of the cost basis from item 2 above to arrive at your overall gain or loss.
   1. You will have a gain if the proceeds on the 1099-B exceed the revised cost basis
   2. You will have a loss if there is still a remaining cost basis.
4. As recommended in other replies, depending on the $$ you may want to consult with a tax professional to make sure you are reporting these transaction correctly.  These types of situations, with limited information and no one on one consultation, are difficult to address.  Hope this provides some additional direction in your case.

[TaxPrepper]

Thanks so much for your response @Rick19744.

What you're saying makes sense; I guess the most confusing part to me is why the total of all the proceeds on the 1099-B does not match the amount of the liquidation distribution on the 1099-DIV.

My 1099-B is for Long-term Gross Proceeds, is a noncovered security, and the basis has not been reported to the IRS. It sounds like, although the Dates acquired are listed to me on my statement, this is merely informational to me and not reported to the IRS on this form, and in fact may not even be accurate. My statement indicates that the Date Acquired and Cost Basis have not been reported to the IRS, only the Date Sold & Proceeds have.

So to report this, I should:

1. Determine the total Cost Basis for all of my holdings as well as the various dates acquired. The Cost Basis can be calculated by looking at the FMV of the shares * quantity vested at each of the various dates. Compare this to the 1099-DIV amount so that I know if the sale was a loss or gain overall. 
2. Since each sale on 1099-B has been reported to the IRS, I must also include a line for each in Form 8949. In fact I only need to focus on sales reported in the 1099-B and not any others as these are the only sales that have been recorded.
3. (Here is where I want to double-check my understanding with you) for preparing Form 8949: 
   1. I must indicate a Date Acquired & Cost Basis for each sale on Form 8949.
      1. Date Acquired: The date acquired for each line was given to me purely as information, but in theory I can try to use this to locate the shares purchased on or around that date. (If there somehow ends up being multiple dates for the same sale then this becomes even more complicated and perhaps my strategy below will not work.)
      2. Cost Basis: To determine Cost Basis for a particular sale I need quantity. Since the quantity sold is not listed to me I must first determine that by dividing proceeds by sale price. Then I can take this quantity * FMV of stock on Date Acquired to determine Cost Basis for that particular block.
   2. Ordinarily in cases where the Cost Basis is more than the Proceeds, this will appear as a loss on the Form 8949. In cases where it is less, this will appear as a gain on Form 8949. However for this case if my understanding is correct, if the Cost Basis is more I still do not record this as a loss but rather instead make them equal since the loss can't be recognized until the last distribution.
   3. When I look at gain/loss, it seems that I need to be checking for each particular block, not the overall gain/loss (see my interpretation of underlined text regarding holding different blocks of stocks from Altaba below). Thus, even if based on my overall cost basis as compared to the initial liquidating amount I had an overall loss, if my research finds that for a particular sale I had a gain, I would still mark this as a gain and not mark the cost basis as equal to the proceeds for that particular sale, because the gain/loss is at the block level. Is this in line with your thinking?

A liquidating distribution received by a U.S. stockholder will first be applied against and reduce the stockholder’s adjusted tax basis in its Altaba common stock, before the stockholder recognizes any gain or loss. A U.S. stockholder will recognize gain as a result of a liquidating distribution to the extent that the aggregate value of the liquidating distribution and any prior liquidating distributions received by the stockholder with respect to a share exceeds the stockholder’s adjusted tax basis in the share. A U.S. stockholder generally cannot recognize a loss on a liquidating distribution until the final liquidating distribution is made, and then only if the aggregate value of all liquidating distributions with respect to a share is less than the stockholder’s adjusted tax basis in the share. If a U.S. stockholder holds different blocks of Altaba common stock (generally as a result of having acquired shares at different times or at different prices), gain or loss is calculated separately with respect to each such block. Any gain or loss recognized by a U.S. stockholder will be capital gain or loss provided the stockholder holds its Altaba common stock as a capital asset.

Does my understanding of all this sound correct to you? Thanks again for your help!

[tax23948]

@Rick19744 thanks for the input. So, what happened was on 09/23/19 they announced their "intention to file the Certificate of Dissolution on October 4, 2019". On 09/26/19 they gave us a liquidation. On 10/02/19 I sold all my shares. On 10/04/19 they "filed a certificate of dissolution". This is why I got the 1099-DIV for that liquidation/dividend and then the 1099-B for the sale.

So, looks like per your suggestion I need to change how I'm reporting this. Instead of setting my cost basis to $0 for the 1099-DIV and using the cost basis for the 1099-B, I need to actually compute the cost basis for each block and report the total cost basis for the 1099-DIV. Then I need to use the remaining cost basis, which in my case will probably be $0, for the 1099-B.

Relevant FAQs:

- As previously announced, the Fund notified The NASDAQ Global Select Market (collectively with the Nasdaq Stock Market LLC, “Nasdaq”) on September 23, 2019 of its intention to file the Certificate of Dissolution on October 4, 2019, and Nasdaq halted trading in the Shares on Nasdaq following the close of regular trading on October 2, 2019. Nasdaq has advised the Fund that trading in the Shares will be indefinitely suspended prior to the opening of trading on October 7, 2019, and that Nasdaq will thereafter file with the Securities and Exchange Commission (the “SEC”) a Notice of Removal from Listing and/or Registration on Form 25 to cause the Shares to be delisted.

- On October 4, 2019, the Fund filed a certificate of dissolution with the Secretary of State of the State of Delaware. The Certificate of Dissolution, which became effective at 4:00 p.m. Eastern Time on October 4, 2019 (the “Effective Time”), provides for the dissolution of the Fund under the General Corporation Law of the State of Delaware. In connection with the filing of the Certificate of Dissolution, effective as of the Effective Time, the Fund closed its stock transfer books and discontinued recording transfers of its common stock, $0.001 par value per share (the “Shares”). Record holders of Shares are no longer able to transfer record ownership of their Shares on the Fund’s stock transfer books, other than transfers by will, intestate succession or operation of law.

[Rick19744]

@tax23948  based on your additional facts, this makes more sense.

I agree with your conclusion, but keep in mind the share cost basis.

So by way of example, if your total cost basis was 5,000 and you received $3,000 in the liquidating distribution, then for the 1099-DIV your would report the $3,000 for both the sales price and cost, netting to zero.

Then for the 1099-B component, you would have a remaining $2,000 cost basis in determining your gain or loss on this part of the transaction.

If you liquidating distribution was $6,000, then you would have a gain of $1,000 when reporting the liquidating distribution.  Then for the 1099-B, your cost basis would be zero and all proceeds taxable.

[jw2016]

On 2019 Premier Turbotax, when select "No" to "Did you get a 1099-B or a brokerage statement for these sales", I will be at the "Choose the type of investment you sold" screen. After select "Everything else" and click its "Learn More", it shows "Other investment: Any investment not classified above, such as liquidating distributions."

However, on 2020 Premier Turbotax, it doesn't show the "Choose the type of investment you sold" screen. Instead, it brings up similar stock sale screen. Are these changes/differences between 2019 and 2020 versions  as expected and correct? Thank you.

[petros63]

@Rick19744 My AABA cash distribution situation is even wackier. I was granted 10 shares of GeoCities stock as part of their "stock incentive plan" at their IPO in 1998 (as a long-time volunteer community leader; I was never an employee). I never sold, and over the years the shares converted to YHOO and finally 6 shares of AABA. I never paid anything for the stock. Is my cost basis $0, since I invested nothing? Is all of that cash distribution then counted as capital gains? Would I report the combined amount of the 2019 original distribution and the 2020 final distribution as investment income on this year's form?

[petros63]

Follow up: I found the original IPO filing, which included the following info:

"(vi) up to 46,154 shares of Common Stock to
be issued pursuant to a technology purchase agreement, assuming an initial
public offering price of $13.00 per share. Includes 15,840 shares of Common
Stock to be issued to the Community Leaders and Liaisons under the 1998
Stock incentive Plan."

So, would my cost basis then be 10 shares @ $13/share, for $130? Let's say I received $180 in 2019 for the pre-distribution, and then $50 in 2020 for the final distribution, for a total of $230. Would I then report a $100 gain on this year's taxes in the "Investment Income" section?

[petros63]

Sorry for a bunch of comments, heh, but it looks like I should have also received a 1099-B, which I have not yet. I have so far only received the 1099-DIV with the box 9, same as last year. It looks like I should expect Computershare to have it mailed/posted by Feb 15, so I suppose I will wait a week or two and see if I receive it. I think I've figured out that my cost basis is $130 based on the expected IPO value. Let me know if that is incorrect.

[Rick19744]

Here are my thoughts:

1. There is really too much going on here to address something like this on a forum
2. Unless you either paid actual cash for the shares OR were issued a 1099-MISC as income, since you were not an employee, you have "0" basis.  Your basis has nothing to do with any expected IPO pricing.
3. Since this appears to be a liquidating distribution, you will not receive any 1099-B.  You will only receive the 1099-DIV.
4. Based on the limited facts, my take on this would be all is reported as capital gain with a zero basis.

[petros63]

@Rick19744 still, appreciate you taking a stab. Since it's such a small amount of money, I'm going to report it as 0 and just pay taxes on it to be safe.