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I purchased stock using using espp worth about \$4500 in 2002.

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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: 6 years ago.Category: Tax
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4/1/2011
Tax Professional: Lev, Tax Advisor replied 6 years ago
Category: Tax
Satisfied Customers: 30,682
Experience: Taxes, Immigration, Labor Relations
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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

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.

Category: Tax
Satisfied Customers: 30,682
Experience: Taxes, Immigration, Labor Relations
Verified
Category: Tax
Satisfied Customers: 30,682
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Experience: Taxes, Immigration, Labor Relations

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