Tax treatment return of capital?

[madkiwis]

In 2021 a company I own ADR shares in (SK Telecom from South Korea) had a stock split and a month later spun off a subsidiary. The subsidiary was not available as an ADR so apparently the way to resolve this was to pay US holders for it instead, they called it "redemption of unissued rights".

After the payment to me went through the market value of my holdings dropped by the amount I received in cash.

Charles Schwab reported this on a 1099-B and reported the payment as a short-term gain with cost basis missing.

It seems pretty rude that when I add this to my Schedule D it comes up as a short term capital gain and the entire amount is taxed as ordinary income. If I sell the shares now all I get is a credit against other capital gains of 15%.

What am I missing? Can I instead input the cost basis myself as the amount I received? Schwab is of no help.

[Mike9241]

you can check the websites of the companies to see if there is information on how a US shareholder should handle the cash received in lieu of SK Square (S) stock or call them 

I am providing a link to IRS form 8937 which the company filed with the IRS regarding the stock split, spinoff, and reverse stock split after the spin-off.  you'll note in item 14 that the spin-off was intended to be a taxable distribution. evidently, SK Telecom (T) decided not to issue S as a US stock. that's why you got the cash.  there is nothing mentioned in the tax form about allocating basis to S. That's why Schwab shows nothing.  Normally when a distribution is taxable no basis is allocated and the holding period starts with the issuance so short-term seems proper.  Check all your Schwab 1099-div to make sure the distribution isn't reported there and what's on the 1099-B is cash for the fractional share if S stock had been issued. 

https://www.sktelecom.com/img/eng/presen/20211213/IRSForm8937ReportofOrganizationalActionsAffectingB... 

Can I instead input the cost basis myself as the amount I received? I believe this would be totally wrong since it was intended for this to be a taxable distribution. however,  others may have different opinions. 

[fanfare]

@madkiwis 

why do you mention return of capital?

What box number of 1099-B has your amount.?