fractional shares

[Sandy88]

Computershare just told me that I don't have to put payments less than $20 received for fractional shares after a spin off on my taxes. Is that true?

[AnnetteB6]

No, to file an accurate and complete tax return you are required to report all of your worldwide income on your return.

The cash that you received will be reported as a transaction in the Investment Income section of your return.  It will look like a sale of stock as far as the details needed to enter the information.  

Take a look at the following information provided by Expert DianeW777 for details about how to report this on your return:

Reporting the sale of fractional shares after spinoff

[Sandy88]

Thank you for your response. I have a few more questions but let me give a little background first.  The original company's stock was purchased through an employee plan slowly over about 30 years.  That 30 year period started over 50 years ago.  The company's stock has split multiple times, has been split into different companies and one of those companies was reacquired and this year, the company merged resulting in this spin off and fractional share distribution. When turbo tax asks for date acquired, are they asking for the date of the original stock or of the fractional shares? If it is the original stock, can I just enter various?  For the cost basis, can I just enter $0 since it will not be possible to figure the cost basis of the original stock before taxes are due? And finally for the holding period, is the for the fractional shares which would be short term, or for the original stock which would be long term?  I did not receive a 1099B since the dollar amount was so small, so the only information I have been able to get is just the amount on the check I received. Thank you for your help.

[Sandy88]

And one more question that I have after reading other posts. For description, do I put Cash in lieu of fractional shares, or do I put the company that produced the fractional shares? Thank you.

[GeorgeM777]

Regarding the date acquired, use the date of the spin-off.  TurboTax is requesting information about the shares you received (including the fractional share), thus, use the date of the spin-off and not your original purchase date. 

Regarding cost basis, it may be helpful for us to know what shares did you receive.  For example, in the spin-off, did you receive more shares of the type you already own.  In other words, did you just add more shares to your existing position.  Or did the spin-off involve different shares in a different company.  Generally, if it's just more of the same, then you divide your cost by the number of shares and the resulting number is your per share cost basis.  However, given the passage of time, you may not be able to determine, with specificity, your cost basis.  If you put zero, you may be paying more tax than is required, however, you won't be penalized for under reporting tax as it relates to this one transaction.  You might consider seeing if your broker tracked your unrealized gain.  Unrealized gain or loss, if it exists, will most likely appear on your monthly account statements issued by your broker. 

It may also be helpful for us to know the name of company.  Many times, companies will issue relevant tax information about how their shareholders should report, for tax purposes, spin-off shares, fractional shares, and other special classes of stock.  If you can, let us know the name of your company so we can research the issue. 

Regarding the holding period, if you are just reporting the fractional share(s) or the spin-off shares, then use the date you received the fractional share and/or the spin-off shares.  You are correct in that if the holding period is one year or less, such holding period is short-term. 

It's up to you how you describe the fractional share.  But it may be helpful for recordkeeping purposes to at least abbreviate the name of the company (using the ticker symbol works too) in your description.  At least that way, you and others will know the context of the transaction.

@Sandy88 

[Sandy88]

The original stock is AT&T and the transaction was with Warner Bros. Discovery. The number of original ATT shares was not impacted and shares of Warner Bros. Discovery were issued along with the fractional share which was given as the cash in lieu of. The only "sale" is the fractional share. So it sounds like the date acquired and the date sold should be the same date which would be the date listed as "distribution and conversion date". Or do I use that date (April 😎 as the acquired date and the date on the check (April 13) as the date sold?  And the holding period would then be short term not reported since the dates are essentially the same?  As far as listing $0 as the cost basis for the fraction of a share, as long as its ok to do, the amount is so small and I'm not worried about paying a little more in taxes if it means I can complete this and not have to worry about the IRS coming back later with interest and penalties over an $11 sale.  Again, Thank you.  You are being very helpful.

[Sandy88]

Sorry, the computer changed the date above. It should read April 8 as the date of distribution and conversion.

[JulieS]

Yes, you should use April 8, the date of sale and conversion, as both your acquired date and sold date. 

It is perfectly fine to use $0 as your cost basis, it is the most conservative figure you can list for your basis. Since the proceeds amount is small, it will have little, or no effect on your total tax.