cost basis for stock sold following acquisition and merger

[pauldev]

Received May Dept store stock as gift in 2004 (originally bought in 1987) In 2005 Federated Dept store acquired May Dept store giving shareholders .3115 shares of Federated plus $17.75 cash for each share of May stock. I had 280 shares of May stock.   Received 87 shares of Federated stock plus $4925 cash.  Federated stock valued at $69/share on date of acquisition/merger.  Paid capital gains in 2005 on cash received .  In 2007, Federated changed name to Macy's.  I held 174 shares of Macy stock since 2007.   In 2023 sold the 174 shares of Macy stock and received $3464 proceeds from sale.  What do I use as the cost basis for the sold Macy stock.  The 1099 from Schwab did not determine basis and said I acquired stock in 2020 when I opened the account in Schwab which is not correct. 

[DaveF1006]

We need some clarification on this and let me retrace your steps.

1. You held 280 shares of Macy's Stock before the acquisition. Federated bought those 280 shares at $17.75 per share and issued you cash for the purchase. 
2. Now you received 87 shares of federated stock (.3115 X 280) in addition to the purchase by Federated. The basis for those 87 shares is $6003 ( 87 X $69)
3. These became Macy's stock as of 2007 as a result of the name change.
4. You mention you have had 174 shares since 2007, which is double of the stocks received at the time of the acquisition.
5. My question is, where did the other 87 shares come from and when did you receive them?

There maybe be something that I am missing but hopefully, you can provide some clarification so we can answer your question. i will await for your reply back.

[pauldev]

Thanks for responding.  The original 280 shares were May Department Store shares not Macy's   In 2005, Federated bought May Dept Stores and issued stock and cash  (.3115 shares in Federated and $17.75 cash for each May share) which resulted in me receiving 87 shares of Federated stock.  I believe Macy's did a 2:1 split after 2007 which gave me the 174 shares.  

I have seen some online answers that say the same as you, the basis for the Federated/Macy stock is the 87 shares from the merger @ 69/share or $6003.  These were more recent posts within the last 5 years or so.  I have also seen some calculations on line for mergers that suggest I use the original basis from the May Dept store stock prior to 2005; they were originally bought in 1987.  These posts were older, more than 15 years ago.  I don't know if tax laws changed since those posts.??  Using the basis from the value after the merger for the 87 shares, as you have suggested, is much more advantageous for me as it results in a loss since I only received $3664 from the sale of Macy stock in 2023

[RobertB4444]

Use the basis after the merger since you were already taxed on gains in 2005.  Document everything as best you can and make sure to save the documentation that backs up your valuation.

@pauldev