Cash/Merger

[Jesse]

$100 per share of old stock was paid to shareholders and reported on 1099-B. Is this considered capital gain when received or is it added to the basis of the original stock with no gain recognized in the current year?

[KJ Judd]

If it's reported on 1099-B, the IRS will be looking for it on Sch. D. So you'll need to report the $100. If it is return of principal, there would be no gain/loss.

Why would you add it to your basis when you are receiving the cash, not paying it?

[theresa d]

more info

it sounds like the shareholders received stock in new company and $100 per share of old co stock? if that's the case generally the $100 cash is taxable as boot received and the new stock retains the basis of the old stock. therefore the 100\sh is all gain. generally the shareholder receives a prospectus which explains the tax treatment. usually you can go on their website and find the tax treatment for the merger.

there are some exceptions to the above treatment if the fmv of the new stock plus the cash is less than the fmv of the old stock at the time of merger-that would all be expained in the prospectus.

[Jesse]

Thanks

it sounds like the shareholders received stock in new company and $100 per share of old co stock?

This is exactly what happened, I'll have to gather some more info.