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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23246
Experience:  Taxes, Immigration, Labor Relations
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I purchased stock using using espp worth about $4500 in 2002.

Resolved Question:

I purchased stock using using espp worth about $4500 in 2002. The stock had a reverse 25-1 in 2005. The company was sold in 2010 for part stock part cash deal. I got $800 in cash as a part of this deal and still have stock of new company worth about $450. How do I calculate and report my cost basis as I got a 1099 for the $800 that I received.
Submitted: 3 years ago.
Category: Tax
Expert:  Lev replied 3 years ago.

LEV :

Hi and welcome to Just Answer!

LEV :

You likely received a form 1099-B that reports the total proceeds $800 - correct?

Customer:

yes, I think its around 800

LEV :

So your original basis was $4500 - thet what you paid - and you received instead - $800 cash and $450 worth of stock - correct?

Customer:

yes those are approximate amounts, do you need exact amounts?

Customer:

I can get those from my brokerage account

LEV :

you will need exact amounts for reporting - not here..

Customer:

okay

Customer:

I bought the stock in 2002 (espp)

Customer:

1641

Customer:

then there was a reverse split of 25:1 leaving me with 65 stocks in 2005

Customer:

then it was sold in 2010

Customer:

hello?

LEV :

As you received $800 in cash and $450 worth of stocks – you may assume that 64% were sold and 36% were exchanged for new shares.


Because you paid $4500 –


$4500*64% = $2880 will be allocated to the part you sold and $1620 to your new shares.


So you will report on the schedule D: sale price $800 and basis $2880 = loss $2080


The basis of your new shares will be $1620


Keep these calculations fro your record.

Customer:

actually that number $450 is incorrect

Customer:

I got $825.5 in cash and 16.65 shares of the new stock

LEV :

what is the value of new shares?

Customer:

thats the question, what price do I use to calculate value

Customer:

today's price or price on day of acquisition?

LEV :

On the day you got them.

Customer:

okay

LEV :

when they were posted on your account.

Customer:

okay

Customer:

so the fact that there was a reverse split in 2005 has no bearing on this calculation?

LEV :

It will not affect the total basis. It will affect the basis of each share.

LEV :

The total basis = what you paid is still the same.

LEV :

If you give me the value of new shares at the time you get them - I will recalculate your basis.

Customer:

so I got 16.65 shares of new stock at 26.21

Customer:

and I got 825.5 in cash

Customer:

I paid 4393.775 for the original stock

LEV :

Ok - let me redo calculations...

LEV :

As you received $825.50 in cash and 16.65 shares @ $26.21 = $436.40 worth of stocks – I will round numbers $826 and $436 – total $1262.


You may assume that 65.5% were sold and 34.5% were exchanged for new shares.


Because you paid $4394 –


$4394*65.5% = $2878 will be allocated to the part you sold and $1516 to your new shares.


So you will report on the schedule D: sale price $826 and basis $2878 = loss $2052


The basis of your new shares will be $1516


Please verify and keep these calculations for your record.

Customer:

Okay, so the initial shares were bought in 2002. HOwever the exchange happenned on 1/29/2010. So the loss whenever I sell the shares with 1516 basis will calculated as long term or short term based on 2002 date or 2010 date?

LEV :

Long term capital loss because shares were owned more than a year.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23246
Experience: Taxes, Immigration, Labor Relations
Lev and 4 other Tax Specialists are ready to help you

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