Restricted Stock and Cash Merger

Forum|Forum|6 years ago
July 10, 2020
7 replies
41 views

November 21st 2019 Milacron was acquired by Hillenbrand. They accelerated the vesting schedule for the non-vested RSU's and RSA's and gave cash for these Milacron vested shares at $11.80 per share plus 0.1612 new shares in Hillenbrand for every share in Milacron. The FMV at close for Milacron shares was $16.8391. The Hillenbrand shares at the close of business was 31.26 from form 8937. If you multiply 31.26 x 0.1612 = 5.0391(stock portion). If you had this to the $11.80 (cash portion) + 5.0391=16.8391 the FMV at close of business for Milacron.

So I have two questions:

1) How do I enter this into Turbotax, I don't seem to be able to find the right place in the step by step interview.

2) Would there be any gain or loss as the cash and stock portion appear to balance each other out?

The way Turbotax has calculated this right now is showing a capital gain loss because the Milacron FMV was originally $16.8391 per share but the net proceeds on 1099B is showing the cash portion only $11.80 so it shows a capital loss of 5.0391 per share.

TurboTax Home & Biz Windows

TomYoung

Alumni - Champ

"The FMV at close for Milacron shares was $16.8391."

I'm not sure exactly where that number is coming from. The relevant number for you is the "fair market value" used by your employer to calculate the compensation created by the (accelerated) vesting of the RSUs and RSAs. If the $16.8391 you've posted is the same as the FMV used by the employer, then all's good.

"1) How do I enter this into Turbotax, I don't seem to be able to find the right place in the step by step interview."

You don't need to use the RSU/RSA "guided" interviews if the compensation created by the vestings is properly reported on your W-2, and I assume it is. There is no "Income Tax Return Reporting Requirement" to use these guided interviews as, generally, nothing on Form 8949 (where security trades are reported) or anywhere else in your income tax return states "this is how I acquired the stock that I sold." You simply use the "regular" 1099-B entry form, and then correct the incorrect basis reported by the broker using the mechanism provided by TurboTax to do so. (In the desktop versions you click on the blue "I'll enter additional info on my own" button and then enter the correct basis in the "Corrected basis box."

"2) Would there be any gain or loss as the cash and stock portion appear to balance each other out?

On these "cash plus stock" deals it seems like some brokers report only the cash proceeds while some brokers report the sum of the cash proceeds plus the FMV of the stock. (I'm sort of guessing here but that's my impression having answered lots and lots of these "cash plus stock" questions over the years.)

Generally a "same day" sale (vesting and sale happening simultaneously) reports a small loss due to selling commissions and brokers fees. Given what you've posted here I'd say your sales should, more or less, be reported as "no gain or loss" or a small loss. Is depends on whether the 1099-B is really using the $11.80 or a slightly reduced figure due to broker commission.

I'd say "use the cash proceeds reported by the broker to enter your sales and derive a basis figure that gives you the correct gain or loss." If you report the correct gain or loss then you've fulfilled your obligation as a taxpayer.

Excalibur97Author

Level 2

Thanks Tom.

For the merger I was offered $11.80 cash per share for my current stock and 0.1612 shares in the new company (valued at $31.26 per share from merger agreement) for each share I had in the old company (valued at $16.8391).

I think my main problem is around Capital gain / loss.

So for example my old shares had vesting accelerated and I was taxed at:

497 shares x $16.8391 = $ 8369.0327 Taxable income Restricted stock awards and units

but on my 1099B

497 shares x 11.80 = $5864.60 Net Proceeds. The cash portion offer of the merger agreement

In Turbotax its calculating 8369.0327 - 5864.60 = (2504.4327) has a capital gains Loss

There is no way to account for the value of the new stock also received as part of the merger 0.1612 x 31.26 = 5.0391 in Turbotax. The stock portion of the merger agreement.

11.80 +5.0391 = 16.8391 = valuation of my old shares

I think there should in essence be no net gain or loss. I need to try and find away to represent this in Turbotax

TomYoung

Alumni - Champ

@Excalibur97

I've told you how to handle this. Enter the proceeds as they read on the 1099-B then enter a derived basis that gets you to the correct answer - either "no gain or loss" or "a small loss due to selling commissions and fees."

Now, you could handle it the obvious other way: Enter the 1099-B with a derived proceeds number - cash + FMV of stock - and enter the "correct" basis. Either way you'll need to correct the basis reported on the 1099-B - I assume the 1099-B will report $0 as the basis - and either way you'll have stated your income correctly.

Personally I'd use the first method as that allows the IRS to "match" your income tax return to their 1099-B, lessening the chance that the IRS will contact you. But either way is perfectly safe as long as you state your income correctly.