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You will report this amount of $6.56 as income in 2008. Generally fractional sale or cash in lieu is reported by the broker on Form 1099B.
You will report this on Sch D as Sale proceeds with zero cost basis as thestock was already disposed off earlier.
Let me know if you have any question.
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.