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Capital Asset Sales Worksheet

On the above mentioned worksheet (imported, generated from import from my financial institution) TurboTax is telling me that I need a "Cost or Adjusted Basis." I asked my financial advisor (they say they can't give tax advice) and they said that "there was no sale and thus no cost basis – you received cash in lieu of shares" so I am really not sure what to put into TurboTax to resolve the issue.

 

Thank in advance!

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1 Best answer

Accepted Solutions
KeshaH
Expert Alumni

Capital Asset Sales Worksheet

When you receive cash in lieu of shares (which often happens in stock splits or mergers when issuing fractional shares would be impractical) this is considered a sale for tax purposes. The cost basis would be the portion for your original investment that's attributed to those fractional shares.

 

You'll need to determine the cost basis of the fractional shares based on your original investment. Since your brokerage form doesn't show the basis, you will need to calculate it yourself based on the corporate action that resulted in the fractional sales.

 

If, for example, this cash in lieu of shares payment is due to a stock split then your original investment will be split based on the number of shares you received in the split. In a 2-for-1 stock split, your original basis would be split in half. 

 

Assume you bought 10 shares for $20. In a 2-for-1 stock split you end up with 20 shares for the same $20. Your basis goes from $2/share to $1/share. Take the new basis per share and multiply by the number of fractional shares that were deemed to be sold to get the basis for your cash in lieu of shares payment.

 

If you truly don't know the basis, you may enter zero - but this may cause you to pay more tax than necessary since the entire cash payment would be treated as a gain.

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2 Replies
KeshaH
Expert Alumni

Capital Asset Sales Worksheet

When you receive cash in lieu of shares (which often happens in stock splits or mergers when issuing fractional shares would be impractical) this is considered a sale for tax purposes. The cost basis would be the portion for your original investment that's attributed to those fractional shares.

 

You'll need to determine the cost basis of the fractional shares based on your original investment. Since your brokerage form doesn't show the basis, you will need to calculate it yourself based on the corporate action that resulted in the fractional sales.

 

If, for example, this cash in lieu of shares payment is due to a stock split then your original investment will be split based on the number of shares you received in the split. In a 2-for-1 stock split, your original basis would be split in half. 

 

Assume you bought 10 shares for $20. In a 2-for-1 stock split you end up with 20 shares for the same $20. Your basis goes from $2/share to $1/share. Take the new basis per share and multiply by the number of fractional shares that were deemed to be sold to get the basis for your cash in lieu of shares payment.

 

If you truly don't know the basis, you may enter zero - but this may cause you to pay more tax than necessary since the entire cash payment would be treated as a gain.

Capital Asset Sales Worksheet

Thank you for the information!

 

I was quite confused as to how to find the information that you referenced on how the cash was given in lieu of shares. However, the amount was very small, so I entered zero and feel comfortable that I am in good shape.

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