Brighthouse Financial shares and cash-in-lieu of shares were issued to Metlife stockholders on August 7, 2017. I acquired the original shares of Metlife in 2009. The Brighthouse shares represent 10.36% of the cost basis. Would I need to include Schedule D and Form 8949 if the net profit on the fractional share is only $19 ?
The "cash in lieu" is simply the "proceeds" from the sale of the fractional share. You'll enter your own calculation of the basis. And yes, the holding period is long term.
You use the "Stocks, Mutual Funds, Bonds, Other" interview and tell TurboTax that a 1099-B was received.
Tom Young
Is this $19 net profit reported to you on 1099-B from MetLife?
Computershare reported the distribution on a 1099B The gross amount was $48.03 but I calculated a cost basis based upon the original cost of Metlife. The 1099B shows Brighthouse as the issuer
The "cash in lieu" is simply the "proceeds" from the sale of the fractional share. You'll enter your own calculation of the basis. And yes, the holding period is long term.
You use the "Stocks, Mutual Funds, Bonds, Other" interview and tell TurboTax that a 1099-B was received.
Tom Young
Yes, you should report it on Form 8949 even though the amount is small. You can report it using your cost. Otherwise, report it just as it is on the 1099-B.
Even if there was no 1099-B you are still required to report income, but the way it was reported will tell you that it is income and not a nontaxable distribution.
In this instance, the entire amount of sales proceeds is taxable because if you read the explanation on the Brighthouse Financial 1099-B, the number of MetLife shares that you own did not change. Therefore, you received "free" shares of Brighthouse Financial stock and "free" fractional shares that were paid out to you in cash. The cost basis of the fractional shares is zero and should be reported as such on Form 8949. My gut tells me that this is a short-term capital gain, but I'm not 100% sure on this.
@bennythetaxman69
No, that's just not correct. Tax free spin offs happen all the time where you end up with the same number of shares in the parent company and some other amount of shares in the new "child" company. Tax rules require that you ALLOCATE your original basis in the parent between the parent and the new child based on the relative FMV of your holdings immediately after the spin off. This allocation would also go to any fractional shares received, but immediately sold via the "cash in lieu". The holding period in the new stock is the same as the holding period of the old stock.
Tom - are you saying that the cost basis for these fractional shares would always be zero since we received the proceeds (cash paid) immediately after the spin off?
NO, though I'll bet most people do report these fractional shares with $0 basis.
You allocate your original basis in the old "parent" stock between the parent and the new child stock the INCLUDING FRACTIONAL SHARE. Since you now know your basis in the child stock the INCLUDING FRACTIONAL SHARE you simply determine the basis for the fractional share and use that as the basis in the PROCEEDS of the "sale" which is the cash in lieu.
So, got 7.65 shares of new stock at a total basis of $87.69? $87.69/7.65 = $11.463 per share. $11.463 x .65 = $7.45 so that's the basis of the fractional share.
Tom is correct regarding the allocation of basis (my bad)...although like many IRS rules, this doesn't make sense to me and re-figuring the basis is impractical if you don't know your basis when you first acquired the MetLife shares. Most of my clients have no idea what their basis is because they acquired the MetLife shares a long time ago (before cost basis reporting became mandatory in 2011). Since the dollar amount of the fractional share is so immaterial in this instance, I would just use a cost basis of zero and move on.
A cash basis of $0 is absolutely correct IF your basis in the parent company is $0, and the IRS's position is that if a MetLife stockholder received their MetLife shares IN THE DEMUTUALIZATION then their basis in MetLife is $0. (Others disagree and no superior court has settled conflicting court opinions on this matter.) But a MetLife stockholder that purchased the stock in the open market does have a basis, and that basis can be allocated to the company that was spun-out.
So, Tom, my Mom is in this boat. She received MetLife shares as a result of the "demutualization" in 2000, so her cost basis is $0. The spin-off of Brighthouse last year resulted in her receipt of $48.03 due to the sale of her fractional share in Brighthouse. My mom's income is < $25,000 so she is eligible to use the free Turbo Tax "Freedom Edition" software via the IRS website to file her federal return. Questions: (1) How do I account for the $48.03 she received from the sale of the fractional share of Brighthouse using the Turbo Tax "Freedom Edition"? (2) Do I need to complete a Form 8949 and a Schedule D in the "Freedom Edition"? (3) Box 5 of her 1099-B is checked, indicating it is a "Noncovered Security". The explanation of that on the back of the 1099-B suggests that the sale of her fractional share may be a long-term transaction. Is that correct? (4) Or would this sale be considered a short-term transaction, since the 1099-B says the "Distribution Date" (which, presumably, is also her acquisition date) is 8/4/17 and the "Date sold or disposed" is 8/10/17? Thanks for any guidance you can provide.
" Questions: (1) How do I account for the $48.03 she received from the sale of the fractional share of Brighthouse using the Turbo Tax "Freedom Edition"? (2) Do I need to complete a Form 8949 and a Schedule D in the "Freedom Edition"? (3) Box 5 of her 1099-B is checked, indicating it is a "Noncovered Security". The explanation of that on the back of the 1099-B suggests that the sale of her fractional share may be a long-term transaction. Is that correct? (4) Or would this sale be considered a short-term transaction, since the 1099-B says the "Distribution Date" (which, presumably, is also her acquisition date) is 8/4/17 and the "Date sold or disposed" is 8/10/17? Thanks for any guidance you can provide."
(1) I've never used any online edition of TurboTax, certainly not the "Freedom Edition". If the Freedom Edition has an interview titled "Stocks, Mutual Funds, Bonds, Other" (or similar) that's the interview to use. You tell TT that you received a 1099-B, enter a proceeds of $48.03 against a basis of $0.
(2) Simply entering the 1099-B does the trick. The 1099-B information is placed on Form 8949, figures from Form 8949 roll up to Schedule D, Schedule D posts information on line 13 of Form 1040.
(3) The concept of "Covered/Noncovered" began in 2010 so anything reported as Noncovered has a good chance of being "long term" but that's not conclusive as "Covered/Noncovered" was phased in starting in 2010. But because your mother's holding of MefLife is clearly long-term (stock received in 2000) so is the holding in Brighthouse.
(4) "Distribution date" isn't a box on the "official" 1099-B
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/f1099b.pdf">https://www.irs.gov/pub/irs-pdf/f1099b.pdf</a>
so it's not a date transmitted to the IRS. Ignore it. It's a long term sale.
Per Brighthouse Form 10 (<a rel="nofollow" target="_blank" href="http://investor.brighthousefinancial.com/static-files/e3a5f1e4-f222-4a86-9586-e33d3cb35347">http://investor.brighthousefinancial.com/static-files/e3a5f1e4-f222-4a86-9586-e33d3cb35347</a>)
"Each U.S. holder’s holding period in our common stock received in the distribution will include the U.S. holder’s holding period in its MetLife common stock on which the distribution was made, provided that the MetLife common stock is owned as a capital asset on the date of the distribution."
Thanks for your quick reply, Tom. I'll try to complete her return tomorrow using your guidance. Appreciate your help!
Since, Box 5 - Check if Noncovered Security on the 1099-B is marked with a "X", the Sale Category would it be Box E - Long Termed noncovered (Long term sales with cost basis not reported to the IRS) or Box F (Long term sales not reported to the IRS)?? Thanks for the assistance.