"The deal allows recognizing gain but not loss."
And the gain or loss is calculated
on a lot-by-lot basis. Gain recognized
is the LESSER of the economic gain, (Cash Received plus FMV of Stock Received minus
basis) or the actual cash received.
(I expect you already know this so
I'm just adding important information for others investigating this
transaction.)
"For RSUs that vested, I already paid tax on the income
in the form of shares withheld (shown in my paystub in detail; net included
without detail in my W-2)"
I assume what you are saying here is
that the GROSS compensation created by the vestings is included in Box 1 of
your W-2, (and disclosed to you in either Box 14 or Box 12), while the taxes you
paid are simply invisibly included in the various "taxes" boxes of
the W-2 and not separately disclosed. It's the GROSS pay that's important
here and that's the number you really need to come up with a per-share basis
for the stock acquired via the RSU.
But in any case the fact that taxes
were paid because of the vesting is irrelevant as far as discussing the sale of
the stock. The taxes paid were associated with the compensation reported
because of the vesting. The sale of the stock is a separate "capital"
transaction.
"2. For RSUs that vested.... broker's 1099 shows $0
basis for many of these lots, greatly increasing my tax burden."
For a few years now, (since 2014?),
brokers only had to report your "out of pocket" cost when it comes
to reporting sales of employer stock. As the typical RSU requires no cash
payment from you the cost reported on a 1099-B for stock acquired via an RSU is
typically $0. I assume - and it would be nice if you would confirm - that
the RSU lots where the broker is reporting
basis were lots received before that reporting requirement changed.
Your per share basis in stock
acquired via an RSU is the same as the per share "fair market value"
used by your employer to calculate the compensation resulting from the vesting,
i.e.,
Basis in GROSS amount of share
received = (Gross # of shares in grant) x (per share FMV used by the employer)
= Compensation reported on the W-2.
"What is the proper way to adjust the cost basis of STJ
vested RSUs?"
Mechanically, within TurboTax, you
adjust erroneous basis reported by the broker by first entering the 1099-B
exactly as it reads, bad basis and all, and then clicking the blue "I'll
add additional info..." button and entering the CORRECT BASIS in the
"corrected cost basis" box that becomes available to you.
But what is vitally important that
you understand is that when it comes to these traditional "cash plus
stock" deals you MUST do your lot by lot calculations outside of
TurboTax. On some deals you'll recognize the true economic gain. On
some deals you'll recognize only the cash as the gain. And on some deals you'll
recognize no gain or loss. Only when you're to that point are you ready
to enter anything into TurboTax and you need to derive the basis
you're reporting against the proceeds reported in order to report the trades
correctly.
"And then is the gain from the merge just $46.75 minus
STJ basis per share?"
NO. Simply using the correct
basis for the shares you're selling doesn't change a thing when it comes to
calculating the correct gain or loss to report.
"3. Why can't we recognize losses at all in this
transaction? Is there any way to use some of these to offset other gains
elsewhere? It seems a bit unfair the way the calculations are defined to
work in only one direction--forcing shareholders to take a gain for something
that ends up being shares we still continue holding!"
There's nothing inherently either
"fair" or "logical" in income tax law. If you're a
parent and have a child who responds to everything you say with "why?",
"why?", "?why", you may have run out of patience resorted to "Just
Because!" or "Because I say so!" It's the same thing here. The law just dictates that
treatment.
"1c. What is my cost basis (when I sell ABT in future
tax years) on the shares received in the exchange?"
Your cost basis for each lot is:
cost basis of lot tendered less cash received for that lot plus gain recognized
on that lot.
YOU MAY HAVE NOTICED THAT I HAVEN'T ANSWERED ANY OF YOUR QUESTIONS ABOUT ESPP SHARES.
I certainly have attempted to deal with questions similar to yours when it comes to "cash plus stock" deals and ESPP shares but I have never found a satisfactory answer the questions:
- Does a cash plus stock deal constitute a "sale" of ESPP stock that requires the recognition of compensation?
- If the answer to 1. is "No", how does one or does one adjust the elements of the ESPP stock tendered when the stock received in the deal is sold?
Since the deal IS considered a sale for regular stock it certainly seems like it's also a sale for ESPP stock and require a compensation calculation, but I've never found a cite that deals with the question directly and previous posters have reported conflicting W-2 feedback. Since many companies do not report compensation arising form Qualified sales of ESPP stock, the fact that you're not seeing any W-2 income here might be simply because all your sales are Qualified and it's left to you to calculate and report the amount. Any chance of that?
If I were in your shoes I'd walk down to the payroll department and ask exactly "what is the correct tax reporting of the ESPP shares?" Assuming you have Disqualifying sales, why isn't the payroll department reporting compensation?
Tom Young
(I have a spreadsheet that makes the myriad calculations necessary when you have numerous lots pretty easy. If you'd care to share a few of your sales of the RSU stock - date acquired, number of share, per share basis - I could post a picture of the results that would illustrate the "derivation" of basis process.)
