Stock merger with Cash to Boot Help

[gogators93]

Can someone please help me enter the following example of a stock merge with cash?  I will use round numbers as an example.  

Cost basis of stock I bought in 2015 was 42,000.

In 2016 they did a stock merge where I got 10,000 in cash and 28,000 of the new stock so my original position was a 4,000 loss.

In 2016 it showed the 10,000 on my 1099 which I entered in turbo tax as 10,000 in revenue and 10,000 cost basis with a gain of $0

In 2017 I sold the stock for 33,000.  My 1099B shows Cost as 28,000 with 5,000 gain.

My true total gain after my 4,000 loss at time of merger and the 5,000 gain is 1,000.  How do I enter this into Turbo tax to show the correct 1000 gain with everything considered.

[TomYoung]

There is just no "one size fits all" answer here.  

The typical cash plus boot transaction will not allow a loss and if that was the case here then the basis in the new stock would be $42,000 - $10,000 cash + $0 gain = $32,000.   And this latest sale would be $33,000 - $32,000 = $1,000.

But if the broker is really reporting the basis as $28,000 that suggests that this was one of those deals where gain (and probably loss) could be recognized based on the total proceeds - cash plus stock - of $38,000 and $38,000 - $42,000 = ($4,000).  The basis of the new stock actually would be $28,000 as reported by the broker so $33,000 - $28,000 = $5,000.  

The original reporting might have been incorrect.

[gogators93]

Thanks, Tom.  Yes, those were pretty close to the actual numbers.  This was the Hilton (HOT) to Marriot (MAR) merger plus cash.  So if I understand, you are saying the MAR trade is correct and I should apply the loss at the time of the merger?  If so, I would have to go back to my 2016 tax return I think.

[TomYoung]

I can't find any reference to a Hilton/Marriot merger.

[Rick19744]

Aren't you referring to Marriott acquisition of Starwood in 2016?

[TomYoung]

If the Marriott acquisition was the normal cast to boot rules then the basis of the stock sold should have been the $32,000 calculated.  Did Marriott do anything to affect that basis between the time of the Starwood deal and your sale of the stock?

[Rick19744]

If this was the Marriott / Starwood transaction, see the attached:
<a rel="nofollow" target="_blank" href="http://files.shareholder.com/downloads/MAR/0x0x917349/857662AF-E126-43C5-892E-059F7FBBFDEB/Starwood_...>

[gogators93]

Yes, sorry.  It was Marriott/ Starwood.  I have the report I ran through CostBasis after the merger. From the report:

I had 500 shares of HOT valued at $41,384
I received 400 share of MAR valued at $69.75 per share on day of merger or $27,900
I received $10,500 in cash which was $21 per share

Total value received - $38,400
Gain/Loss was -$2,984

Per report, total cost basis for 400 MAR is $30,884 or $77.21 per share

2017 1099B show MAR Sell of 400 $84.75 for $33,900 with Cost Basis of $27,900

Sorry for all the details to get to one question.  If Turbo Tax imports the sale as shown, how do I adjust the cost basis correctly in Turbo Tax?  I know it won't match my 1099B when i adjust so want to make sure I do it correctly.

Thanks again for all the help.

[gogators93]

Duplicate

[TomYoung]

Well adjusting the basis is easy enough.  When you enter the sale using the default 1099-B entry form enter the 1099-B as it reads but then click on the "I'll enter additional info on my own " blue button.  On the next page enter the correct basis in the "Corrected cost basis" box.  TurboTax will report the sale on Form 8949 "as reported by the broker" but will put an adjustment figure into column (g) of the Form, a code "B" into column (f) of the Form, and the correct amount of gain or loss which includes the adjustment.

However, brokers are the experts when it comes to reporting basis so I'd first ask the broker why the basis being reported isn't the $30,884 you'd expect.

[Rick19744]

I believe the brokerage statement basis is correct and get this same result following the tax information sheet attached above.

You also have most of this correct, except you did not adjust the basis computation for the loss:

Basis of Starwood stock  $41,384 less cash received of $10,500 less the loss on the exchange of $2,984 = $27,900.

[gogators93]

I will call the broker tomorrow and ask them about the cost basis.  I was strictly going by the CostBasis report that is a wizard for this exact merger with my information entered giving me the cost basis.  I know the loss at time of merger isn't allowed but examples I have looked at showing how to calculate cost basis when original merger is a loss shows it starting with the original basis of the stock you owned minus cash received.  Thank you both for all the help.  You have been extremely helpful.

[Rick19744]

The loss should have been allowed and that is how you arrive at the $27,900.  If the loss was not allowed, the basis would have been higher.

[gogators93]

From the instructions on the Cost Basis report, it looks like the loss at time of merger was not allowed but a gain would have been taxable.  It said if the cash to boot or total of cash to boot appears on the 1099B to enter it as both the Sale and Cost Basis with a gain of $0.  As mine only showed the $10,500 cash on my 2016 1099B as I still owned the MAR stock at the end of the year,  I only entered that amount so it would appear from example 3 of the link that shows my scenario that I have to adjust the cost basis as step 4 says no loss allowed.   

<a rel="nofollow" target="_blank" href="http://files.shareholder.com/downloads/ABEA-43PVYW/0x0x500733/8F6651F7-0F5A-41BB-92D3-793C3F2CF210/d...>

[TomYoung]

Not really an answer to the original question but the only way to attach a picture of the 2016 calculation per costbasis.com.  The $30,884 is the correct starting point for the basis after the 2016 sale.