Go to Jeff Salisbury LWGate Home Page.From: Rich Carreiro <rlcarr@animato.arlington.ma.us>
Subject: Re: 1099-B question
Date: Mon, 14 Feb 2000 12:57:47 -0500
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>Last year one of my stocks split. In order to balance the exchange, I >received a small cash amount which was then reported in Box 2 of a 1099-B >form. It was not a sale of actual stock. How do I report this on my taxes? >Since there was no sale of stock, there is no cost basis. Au contraire. There was a sale, in all likelihood. The usual way this can come up is (say) if a stock splits something like 3:2 and you own an odd number of pre-split shares. Since a 3:2 split means you get 1.5sh for ever share you own, if you own an odd number of shares, you'll get a half-share as a result of the split. Since regular companies (unlike mutual funds) don't deal with fractional shares (I know about DRIPs, but those fractional shares are bookkeeping entries into a pool of whole shares) you don't actually get that 0.5sh. Instead, it gets sold and you get cash in lieu of the share. If this is what happened with you, there was indeed a sale of half a share of stock. The proceeds are the cash you got and the basis is whatever it is, based on what you paid for the original block. If you owned 45sh that you paid $450 total for and there was a 3:2 split, leaving you with 67sh and (say) $10 cash, your basis in the original 45sh was $450 and since splits don't cange total basis, your basis in the 67.5sh was also $450, which means your basis in 0.5sh was (0.5/67.5) * $450 = $3.33, which means you had a capital gain of $6.67 on the sale. Rich Carreiro rlcarr@animato.arlington.ma.us - -
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