How do I determine cost basis?

Forum|Forum|7 years ago
June 2, 2019
1 reply
23 views

I had some inherited Aetna stock that was converted into CVS stock in 2018 upon merging.I have several incomplete lines in my return looking for a cost basis, all labelled "Aetna Inc New Com *exchanged for". How do I find a number to enter, as this was not a voluntary sale and no $ was withdrawn from the account?

TurboTax Premier Windows

Best answer by hbl3973

From the merger agreement S-4 at the SEC web link https://www.sec.gov/Archives/edgar/data/64803/000119312518002957/d482402ds4.htm :

Material U.S. Federal Income Tax Consequences

The exchange of Aetna common shares for the merger consideration pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Accordingly, an Aetna shareholder that is a U.S. holder (as defined in “Aetna Proposal I: Approval and Adoption of the Merger Agreement and CVS Health Proposal I: Approval of the Stock Issuance—Material U.S. Federal Income Tax Consequences”) will recognize taxable capital gain or loss in an amount equal to the difference, if any, between (i) the sum of (x) the amount of cash, including cash in lieu of fractional shares, received by such U.S. holder in the merger and (y) the fair market value of the shares of CVS Health common stock received by such U.S. holder in the merger and (ii) such U.S. holder’s adjusted tax basis in the Aetna common shares exchanged therefor.

If a U.S. holder’s holding period in the Aetna common shares surrendered in the merger is greater than one year as of the date of the merger, the capital gain or loss will be long-term capital gain or loss. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of a capital loss recognized in connection with the merger is subject to limitations under the Code. If a U.S. holder acquired different blocks of Aetna common shares at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of Aetna common shares that it holds.

A U.S. holder’s aggregate tax basis in CVS Health common stock received in the merger will equal the fair market value of the CVS Health common stock as of the date of the merger. The holding period of the CVS Health common stock received in the merger will begin on the day after the merger.

You can use the average of the 81.65 high and 79.78 low CVS stock price for the FMV.

hbl3973

Answer

Alumni - Champ

From the merger agreement S-4 at the SEC web link https://www.sec.gov/Archives/edgar/data/64803/000119312518002957/d482402ds4.htm :

Material U.S. Federal Income Tax Consequences

The exchange of Aetna common shares for the merger consideration pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Accordingly, an Aetna shareholder that is a U.S. holder (as defined in “Aetna Proposal I: Approval and Adoption of the Merger Agreement and CVS Health Proposal I: Approval of the Stock Issuance—Material U.S. Federal Income Tax Consequences”) will recognize taxable capital gain or loss in an amount equal to the difference, if any, between (i) the sum of (x) the amount of cash, including cash in lieu of fractional shares, received by such U.S. holder in the merger and (y) the fair market value of the shares of CVS Health common stock received by such U.S. holder in the merger and (ii) such U.S. holder’s adjusted tax basis in the Aetna common shares exchanged therefor.

If a U.S. holder’s holding period in the Aetna common shares surrendered in the merger is greater than one year as of the date of the merger, the capital gain or loss will be long-term capital gain or loss. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of a capital loss recognized in connection with the merger is subject to limitations under the Code. If a U.S. holder acquired different blocks of Aetna common shares at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of Aetna common shares that it holds.

A U.S. holder’s aggregate tax basis in CVS Health common stock received in the merger will equal the fair market value of the CVS Health common stock as of the date of the merger. The holding period of the CVS Health common stock received in the merger will begin on the day after the merger.

You can use the average of the 81.65 high and 79.78 low CVS stock price for the FMV.