Do I need to show cost basis for a cash/lieu proceeds listed on Form 1099-B as Other Transaction when there was no sale at all?

[Anonymous · Accepted solution]

no, you don't have to report the cost.     but yes you have to report the CIL because proceeds are reported to the iRS.     the effect on your return could be minor depending on what the cost would be.  CIL usually results when there is a stock split, reorg , merger, etc and the company would need to issue fractional shares.  rather than do that the frac share is sold at market value and you receive the proceeds.    in theory, the cost of the original shares should be allocated among the new share including the fractional shares.  many don't do this because either they don't know to do this or the cost allocated is small.  technically if they were to sell the stock, the cost basis would be overstated because cost wasn't allocated to the frac shares.  

[taz46tg57]

Thank you for your answer. All makes sense. Where do I indicate the CIL? Under Dividends paid under the issue? Or adjust cost basis when the issue is finally sold?

[Anonymous]

If I report the CIL without a cost basis, TurboTax reports it as an error. The brokerage statement show N/A under cost basis. If a report the basis as 0, it changes the total gain/loss.

[RobertG]

Yes, if the basis is zero, then the entire amount is taxable.  

So your choice is to either report the income now or reduce the basis of your remaining stock by allocating the basis in that stock to this transaction.

See Hakitoff's answer above.

@Anonymous