Where to enter Proceeds from Sale of Rights for a stock?

[pbs2bz]

Hello,

I own shares of XYZ stock.  I received $169 for the Proceeds from Sale of Rights (I sold my rights to purchase shares at a future date for a certain price.  This payed me a few cents per share that I owned.

Can you please tell me how to enter this into Turbotax Premier?

Thanks,  Phil

[DavidD66]

You report in same way you would report the sale of stock.  Even though its not reported on a Form 1099-B:

• Type "1099B" in to Search  and hit enter 
• Click on "Jump to 1099b" 
• Answer  Yes  to "Did you have investment income in 2023?"  
• Click through the program until you get to "Let's import your tax info?", and click on "Enter a different way". 
• Click to highlight the box with "Stocks, Bonds, Mutual Funds", then click on Continue.  
• Enter something for "Bank or Brokerage" and click on Continue.  
• Answer No to the Employee stock question.  
• Continue through screens until you come to the page with Now, enter one sale ...
• Enter the information for your Stock Rights sale.

[pbs2bz]

Update:  I think I'm making this way too complicated.

After carefully adding up all the gains in my 1009-B statement, it appears that the $169 was not included in the Total Proceeds Gains amount.  So, when I add in this separate proceed for "Undetermined Term Transactions for Non-covered Tax Lots" (phew)  it increased the Total Gain in Turbotax by that amount.  I guess that makes sense?

Thanks David,

but that's not helping me.  I've tried to enter these proceeds 6 different times with the same results.  I don't think doing it a 7th time will help.  lol

TurboTax treats this as a stock sale every time I try to enter this. 

The only way I have been able to make the TurboTax Total Gain or Loss to equal my Brokerage 1099B Statement Net Gain Total is by entering:

Box 1d - Proceeds as $169  and

Box 1e - Cost or Basis also as $169

At this point I have given up.  If anyone has any other ideas I would greatly appreciate it.

Also:  If I just delete this entry in my downloaded list of transactions from my broker the Total Gain in Turbotax matches my 1099-B.  I may just go that route!   The IRS can come get me if they don't like it, I guess.

[pbs2bz]

David,

re: "Even though its not reported on a Form 1099-B"  - Sort of...

Update:  It is included in the Total Proceeds amount in my 1099-B, but NOT added in to Net Gain total.  In other words, the $169 is not included in my Net Gains.   To me, it really shouldn't be treated as a stock sale - because it wasn't.  I think that's why Ameritrade did not include it in the Net Gain total.

It is reported, and that's the problem.  It is reported in the "UNDETERMINED TERM TRANSACTIONS FOR NONCOVERED TAX LOTS" (1099-B from Ameritrade)  section of my Proceeds from Broker and Barter Exchange Transactions.

thanks,

Phil

[pbs2bz]

I'll answer my own question.   Since the income of $169 came from Selling the Rights to Purchase (offer) and not from selling any shares, then I think it really should be accounted for by reducing the Basis of the stock by $169 after it is sold and  entered in the Capital Gains section.  Makes a lot more sense to me.  Anyone else?  Bueller?

good luck!

[PatriciaV]

Did you receive a prospectus or information letter regarding these stock rights? If so, there should have been a discussion of tax treatment. Typically, if the tax status is taxable, you would have received Form 1099-DIV that reported the basis for the rights. If the tax status is non-taxable, some portion of your stock basis may be allocated to the rights. Allocation of basis is to your advantage, as this can offset any proceeds from the sale of the rights. 

If you chose to allocate basis, you would report the sale proceeds from Form 1099-B in the same manner as any stock sale, using the allocated cost basis. This could result in no taxable gain or loss from the sale.

Since the brokerage didn't know how you treated the stock rights, they reported the sale as an "undetermined transaction" and could not report a basis. The taxpayer makes the decision on how to report the sale.

@pbs2bz 

[pbs2bz]

No information or discussion from broker on how to treat this situation.  I'm not going to go crazy over trying to figure out what to do with this.  I've deleted it from my Proceeds which makes the Total Gain or Loss in Turbotax the same as in my 1099-B.

thanks for your help

[Mark-D]

Another set of observations and questions on sale of rights.

TurboTax is confusing because it asks in Sales info (Boxes 1a - 1e) "What type of investment did you sell?" and gives choices Stock, Crypto, Mutual fund - index fund-EFT, Bond, Options.

But my 1099-B says "Proceeds from sale of rights" , there are several hundred dollars in block 1d- Proceeds, Date acquired shows N/A.  There are no TurboTax dropdown options for sale of rights. The TurboTax instructions do not explain how to address this.

Can TurboTax change the dropdowns?  (to add "Proceeds from sale of rights")

The stock we have held long term - for years. No shares were sold.

The other question is what to do for "Box 1e - Cost or other basis" ? 

[JamesG1]

Stock (non-employee) may be the best option available to select under What type of investment did you sell?

The issuer of the IRS form 1099-B either does not have the cost basis or is not required to disclose the cost basis.  Review your personal records including sales tickets to determine a cost basis.

If the stock rights were issued to you because you were an owner of stock, you may choose to allocate the cost basis of the original stock over the original stock and the stock rights.

Consider this example, you purchased one share of stock for $50 and you were issued one stock right.  Allocate the $50 cost basis over the original one share of stock and the one stock right.

[Mark-D]

Thank you James.

I know the value of the original stock when I received it.

Using your example and amount,  it would be years ago (so long term), I received (inherited) one share of stock for $50. In 2024, using the $50 example, the 1099-B would say I received $3.23 as  "Proceeds from sale of rights."  I still own the one share.

If I say in TurboTax I say "What type of investment did you sell?" and select choice Stock (non-employee), and then  list the basis as $50, would TurboTax show a net loss of $50.00 - $3.23 = $46.77 ? And is that okay to do it that way? Where a "Proceeds from sale of rights" generates a large loss?  Or does one list the basis at the $3.23 ? or what?

[JamesG1]

I'm sorry that I was unclear.

In your example, the cost basis of the original share of stock is $50 and the right is valued by shareholder services at $3.23 even though the right was issued to you at no cost.

Before the right was issued, the cost basis of the one share of stock is $50.

After the right was issued, the cost basis of the original share is allocated over both the original share and the right.  The computation would be:

  Value of one share   $50.00     50.00 / 53.23 = .9393 X $50.00 =  $46.97 rounds to $47

  Value of one right     $  3.23       3.23 / 53.23 = .0607 X $50.00 =   $ 3.03  rounds to $ 3

                                       $53.23                                                                $50.00                   $50

Enter $3 as the cost basis of the right.  $47 remains the cost basis of the original share.

[Mark-D]

Thank you James!

In doing more research, I found a reference in another broker to rights being offered but not registered under the US securities law, so the manager of the stock was not permitted to pass the rights on to the holders. As a result, the broker  “sold the rights in the local market and the proceeds from the sale of the rights, net of fees and expenses, are being distributed.”

In reading this, I’m assuming the same thing happened to me- got a distribution. I even wondered if using a 1099-B was the best form to have given me, instead of a 1099-DIV 

[MarilynG1]

Yes, the 1099-B is appropriate for reporting a Sale.

@Mark-D 

[Mark-D]

Because of your help James and Marilyn, I’m figuring this out. I see TurboTax doesn’t seem to recognize that besides Stock, Crypto, Mutual fund - index fund-EFT, Bond, Option the TurboTax dropdown, one can also get a 1099-B for as the IRS says: sales of “stocks, commodities, regulated futures contracts, foreign currency contracts, forward contracts, debt instruments, options, securities futures contracts, etc., for cash.” It’s in the “etc” where we would find sale of rights. And then the basis for the sale of the rights isn’t the basis for the stock itself, it’s the basis for the rights, as James you said. So, TurboTax besides not recognizing all the types of sales that can be reported on a 1099-B also doesn’t then give its customers guidance on how to calculate the basis for some of these less obvious situations.  It’s the TurboTax Community and people like you both that are essential to helping people!