1099-B Reporting Based on Merger with Cash to Boot

[carriskoul]

Hi everyone - please bear with this one as there are some details that seem confusing to me based on topics I have read on subject sale and how info was reported on my 1099-B.

Some of you may have had a similar situation.

• Received 14.21 shares of TTWO + cash to boot [$3.50 per Zynga shares (350) = $1,225] in exchange for ZNGA.
• Cost basis on ZNGA was $3,451 acquired on 7/22/2020.
• I was informed market value/share of TTWO on 5/21/2022 was $116.12, therefore market value of TTWO on 5/21/2022 closing was $116.12 x 14.21 = $1,650.06.

Here is where it gets a little confusing based on my 1099-B statement for the reporting sales of ZNGA.

• 350 shares sold on 5/24/2022 [proceeds reported = $1,225 <-boot cash only? + cost basis reported $3,451 = loss reported $2,226].

I'm understanding that I should really report the ZNGA cost basis as $1,225 for a no loss/gain result based on the fact that the boot cash is only taxable AND is the same amount to reduce on the TTWO cost basis.

• *IS THIS CORRECT?
• If so, cost basis of 14.21 shares of TTWO is [$3,451 (old Zynga basis) - $1,225 (cash to boot) = $2,226].
• Then TTWO price/share [$2,226 / 14.21 = $156.65].
• Since they paid me cash ($25.76) instead of the fractional .21 share, I end up with the adjusted cost basis [$2,226 - ($156.65 x .21) = $2,193.10 for the 14 shares].
• Cost basis on .21 shares = $32.90 at date of merger 5/24/22.
• **Is it correct that the holding period for the 14 TTWO shares (i.e. takes on the original ZNGA date acquired) now becomes the former stock's acquired date 7/22/2020?  (My statement says otherwise - 5/24/2022?).

If what I have laid out above is not completely correct the only other way, I would think this is handled is if the merger was fully taxable.  Maybe this is the question to have asked up front.

• ***Would I need to include the cash to boot total + the market value of the 14.21 TTWO shares as my corrected 1099-B proceeds (i.e. $2,875.07) for the sale of the 350 ZNGA shares with the original cost basis of $3,451 AND my 14 shares of TTWO cost basis adjusted at $1,625.68 (acquisition date 5/24/2022)?

My apologies for all this detail.  But this all stems from how my broker reported the info on my 1099-B.

It seems like either a correction for the proceeds or the cost basis needs to be made for the disposed 350 shares of ZNGA based on what is taxed.

[DianeW777 · Accepted solution]

In a merger situation each one is uniquely different and somewhat the same.  

It would seem you should report the sale as it is shown on your Form 1099-B since the broker knows how the deal came together.  Your acquired date should be the date you received the original stock. For this reason the new cost basis of your TTWO stock received in the merge would not be what you calculated ($3,451 - $1225 = $2.226).

In this case the cost basis of the new stock would be value of the new stock on the date received or $1,650.06. And the new date acquired would start the holding period since this would be considered a taxable trade (see below).

• Cash to Boot. Sometimes a corporation goes through a merger where you receive stock in a new company plus some cash. The cash part is called 'cash to boot' since you got it in addition to the new stock.  The typical cash to Boot transaction will not allow a loss, but in your case I would use the broker statement (Form 1099-B).
  • IRS Publication 550
  • Holding Period: Nontaxable trades. If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property.

[carriskoul]

Thank you for your reply.  Much appreciated.

So based on the information given (note: added detail for cash in lieu) and feedback I conclude the following:

Use broker info from 1099-B as reported and on Form 8949:

• Zynga 350 shares, Dates: acquired 7/22/20, sold 5/24/22, Proceeds *$1,225, Cost Basis $3,451, LT Loss ($2,226).

Cost Basis of New Stock 14 Shares of TTWO

• Value of 14.21 shares exchanged is $1,650.07 (based on share price at closing on 5/20/22 @ $116.12/share).
• Cash in lieu for .21 fractional share given on 5/23/22, $25.76 and to report as proceed on form 8949.
• Cost basis of fractional share .21 x $116.12 = $24.39 and to report on form 8949.
• Sold 5/24/22 ST Gain $1.37 and to report on form 8949.
• Cost basis of 14 shares acquired on 5/24/22 is $1,650.07 - $24.39 = $1,625.68.

*This was cash to boot calculation ($3.50 cash to boot received per share of original stock) i.e. $3.50 x 350).

Based on what I outlined above and from the 1099-B info, would this be correct for form 8949 sales/losses reporting?

[RobertB4444]

Based on the numbers you have reported your math looks correct.

@carriskoul 

[carriskoul]

Thank you!

[yamoinca]

An important point for the gain/loss in the T2-Zynga situation for your 2022 tax year reporting is based on the cost basis of your shares in each transaction. If it is above a certain price, then you should show 0 gain, otherwise gain depends on other factors.

AFAICT you have to elect to make a final manual adjustment to bring the TurboTax gain/loss to zero (one of the final steps if you are using the assisted steps and report it as company stock sale, RSU/ESPP, etc).

There is a discussion in the company Slack channel (search for stock in channel names) for more info/details.

You also should have received an email which describes it, but yeah in terms of how to enter the information between what Etrade sends and TurboTax processes it is quite complicated/messy to understand.