We had Wachovia stock which was acquired by Wells Fargo back in December 2008. How do you calculate the cost basis on stock after acquisition?

[TomYoung · Accepted solution]

The acquisition of Wachovia by Wells Fargo was a tax-free stock for stock transaction.  Accordingly your original basis in Wachovia didn't change.  You received 0.1991 shares of Wells Fargo for each share of Wachovia you tendered. 

So, for example, if you had 500 shares of Wachovia with a cost basis of $10 per share, ($5,000), that lot got "transformed" into 99.55 shares of Wells Fargo with a cost basis of $50.23 ($5,000/99.55) per share.

I'd expect that fractional shares were not issued but were instead purchased via a Cash in Lieu (CIL) transaction.  So in this case, for this particular lot, the proper reporting would have been to deduct a basis of $27.62 ($50.23 x .55) back in 2008 leaving this lot with a reduced basis of $4,972.38.  But if you didn't do that and simply reported the CIL as pure income, (i.e., deducted no basis), the the original basis would still be the $5,000.

Tom Young