In early 2020, I bought units in separate lots but all in the same month in a given stock A. In late 2021, the company was acquired by another company B. As part of the M&A agreement, the existing stockholders in company A received cash consideration and the stock would no longer trade under the previous ticker under which I bought it. Also, given that I received the cash distribution, I no longer hold the stock in my brokerage account. The broker issued 1099 form has 3 different types of line items related to the stock A under:
Under the short term gain section, the amount for proceeds and the cost basis is exactly the same. Therefore there is no gain or loss. Under the long term gain section, there is some long term gain amount. Additionally, there is a Nondividend distribution amount listed under box 3 as well. This amount hasn't been reported to IRS as per the broker provided 1099 form.
I understand conceptually that nondividend distribution is return of capital used to reduce the cost basis to zero, and beyond that point any nondividend distribution then becomes subject to capital gains. But in my situation, I'm unable to figure whether I need to pay tax on the nondividend distribution or not.
What, if anything, should I do or consider?
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the broker is supposed to adjust the tax basis for non-dividend distributions. so if you sold the security or there was a taxable disposition the NDD should be reflected in the basis and those the correct gain is reported.
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