I got cash + stock in Co B in exchange for stock in Co A. I think I owe tax only on the cash? 1099-B proceeds=cash+stock and no basis. Do I manipulate basis so gain=cash

[tjkerschner]

I received cash plus 150 shares of Company B stock in exchange for Company A stock I owned as part of a merger.  The 1099-B form shows proceeds equal to the value of the stock plus the cash.  I believe that I am liable to pay taxes on just the cash portion and my old basis in Company A stock becomes my new basis in Company B stock.  There is no basis listed on the 1099-B and it says to record code E on my form 8949.  If I am correct and am only to pay taxes on the cash portion, then should I manipulate the basis so that the proceeds - basis = cash received?  I don't think I should have to pay taxes on the entire proceeds portion as that includes stock I have not yet sold. 

[TomYoung]

These "Company A"/"Company B" style questions drive me absolutely crazy.  Why?  BECAUSE THERE'S NO "ONE SIZE FITS ALL" answer anybody can give to these questions.  HOW you account for the transaction depends entirely on how the deal was structured.  You may be exactly right in your approach here, you may be 100% wrong.  There's simply no way to tell because the companies involved HAVEN'T BEEN DISCLOSED.

[tjkerschner]

Stock A was Rockwell Collins.  I received cash plus stock of United Technologies Corp as a result of their merger.  No basis was reported on 1099-B.  Do I just pay taxes on the cash or boot received?  Does my original basis in Rockwell Collins become my basis in UTX stock?  Do I manipulate the basis on the form 8949 so my gain equals the cash I received?

[velvetmonster]

I have the same problem and the same stock. Zacks says "If you trade old shares for new through a merger or acquisition, the IRS does not look on the event as a taxable transaction...Your original investment has not been disposed of, as far as tax liability is concerned, and no capital gain or loss has to be reported." But I have also read that if there's an amount in 1099-B box 1d, it has to be reported as income. I would like an answer to this also.
 

[velvetmonster]

Oh, I have found this: "Under the terms of the agreement, Rockwell Collins’ shareholders will receive $93.33/share in cash and $46.67/share in United Technologies common stock." So the merger did result in a cash payout, which is considered a straightforward gain. We pay tax on the amount in 1099-B box 1d because it is cash income. Oh well. There are worse problems.

[TomYoung]

@velvetmonster

I gave a specific answer to this specific transaction 10 days ago.  The SUM of the cash and the fair market value of the stock received are your "proceeds."

[TomYoung · Accepted solution]

"Do I just pay taxes on the cash or boot received?"

No.  This was a fully taxable transaction.  You deduct your basis from the entire proceeds (cash + stock) and report a gain or loss accordingly.

"Does my original basis in Rockwell Collins become my basis in UTX stock?"

No.  You have a new basis that's the same, on a per share basis, as the value used for the "stock" portion of the proceeds.

"Do I manipulate the basis on the form 8949 so my gain equals the cash I received?"

No.

Tom Young

NOTE TO FUTURE READERS OF THIS ANSWER:

You must understand that the answer given is relevant to this particular transaction.  There simply is no one or two sentence answer that covers all cash + stock mergers/acquisitions.

[DDollar]

Mergers that include both cash and stock proceeds can be very complicated.  I suggest you consult the Investor Relations page of both companies websites to determine exactly how you should handle the transaction.  Also, most broker/dealers have research departments that deal with/research issues such as this, so you may want to consult with them as well. 

[sterlinghts043]

i got 5mil cash plus stock of 1 mil in purchaser. is my reportable proceeds, subject to tax 6 mil ?

[Critter-3]

Mergers that include both cash and stock proceeds can be very complicated.  I suggest you consult the Investor Relations page of both companies websites to determine exactly how you should handle the transaction.  Also, most broker/dealers have research departments that deal with/research issues such as this, so you may want to consult with them as well. 

[sterlinghts043]

thank you