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Subject Author Date
Cash in lieu of stock basis? Phil 04-05-2008
Posted by removeps-groups@yahoo.com on April 6, 2008, 4:15 pm
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> 1. On 08/11/2006 purchased 100 sh of FRO for $4,348.95 ($43.44 per sh)
> 2. On 03/22/2007 received 10 sh of SFL as dividend from FRO
> 3. On 03/22/2007 received $19.34cashinlieuof .71430 sh of SFL
> 4. On 03/22/2007 received regular $205 qualifiedcashdividend from FRO
> 5. On 03/22/2007 price of FRO was $34.83
> 6. On 03/22/2007 price of SFL was $27.25
> 7. $19.34cashinlieuof .71430 sh of SFL was reported on a 1099-B
>
> What is my basis for this? or do I show this as purchased on 03/22/2007
> for $0 and sold on 03/22/2007 for $19.34 as short term cap Gain?

By my calculations, item (4) is irrelevant.

// true number of shares after the split
FRONumShares = 100
SFLNumShares = 100*3/28 = 10.71428...

// cost basis in FRO and SFL right after split
FRO = FRONumShares*34.83 = 3483
SFL = SFLNumShares*27.25 = 292
net = FRO + SFL = 3475

// spinRatio is SFL's part of the net market cap
spinRatio = SFL / net = 0.0773422...

// calculate cost basis of the true number of SFL shares
original = 4348.95
OriginalSFL = Original * spinRatio = 336

// calculate cost basis of the fractional SFL shares
SFLFraction = SFLNumShares - roundDown(SFLNumShares) = 0.71428...
OriginalSFLForCashInLieu = OriginalSFL * SFLFraction/SFLNumShares = 22

// calculate cost basis for the stocks remaining in your holdings
// this will be useful when you later sell or gift the shares
// the purchase date for all shares will be 08/11/2006
OriginalSFLForHoldings = OriginalSFL - OriginalSFLForCashInLieu = 314
OriginalFROForHoldings = Original - OriginalSFL = 4013

Make sense?

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Posted by Phil on April 9, 2008, 12:22 pm
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 removeps-groups@yahoo.com wrote:
>
>> 1. On 08/11/2006 purchased 100 sh of FRO for $4,348.95 ($43.44 per sh)
>> 2. On 03/22/2007 received 10 sh of SFL as dividend from FRO
>> 3. On 03/22/2007 received $19.34cashinlieuof .71430 sh of SFL
>> 4. On 03/22/2007 received regular $205 qualifiedcashdividend from FRO
>> 5. On 03/22/2007 price of FRO was $34.83
>> 6. On 03/22/2007 price of SFL was $27.25
>> 7. $19.34cashinlieuof .71430 sh of SFL was reported on a 1099-B
>>
>> What is my basis for this? or do I show this as purchased on 03/22/2007
>> for $0 and sold on 03/22/2007 for $19.34 as short term cap Gain?
>
> By my calculations, item (4) is irrelevant.
>
> // true number of shares after the split
> FRONumShares = 100
> SFLNumShares = 100*3/28 = 10.71428...
>
> // cost basis in FRO and SFL right after split
> FRO = FRONumShares*34.83 = 3483
> SFL = SFLNumShares*27.25 = 292
> net = FRO + SFL = 3475
>
> // spinRatio is SFL's part of the net market cap
> spinRatio = SFL / net = 0.0773422...
>
> // calculate cost basis of the true number of SFL shares
> original = 4348.95
> OriginalSFL = Original * spinRatio = 336
>
> // calculate cost basis of the fractional SFL shares
> SFLFraction = SFLNumShares - roundDown(SFLNumShares) = 0.71428...
> OriginalSFLForCashInLieu = OriginalSFL * SFLFraction/SFLNumShares = 22
>
> // calculate cost basis for the stocks remaining in your holdings
> // this will be useful when you later sell or gift the shares
> // the purchase date for all shares will be 08/11/2006
> OriginalSFLForHoldings = OriginalSFL - OriginalSFLForCashInLieu = 314
> OriginalFROForHoldings = Original - OriginalSFL = 4013
>
> Make sense?
>
I think so. My cost basis for the fractional shares $22, which means I
have a small short term loss. If this correct I think just show my basis
as $19.34, so as not to attract any attention from the IRS.
Phil

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by removeps-groups@yahoo.com on April 10, 2008, 4:05 am
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> I think so. My cost basis for the fractional shares $22, which means I
> have a small short term loss. If this correct I think just show my basis
> as $19.34, so as not to attract any attention from the IRS.

You mean you'll make the gain zero so as not to attract attention?
This makes no sense. It's very unlikely that the IRS computers will
flag this anyway, and your honest computation was a cost basis of $22,
so go for it. But there was some discussion on this thread about
whether to use the split date or ex-dividend date (is that the date
they announced it).

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by DF2 on April 10, 2008, 11:36 am
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In misc.taxes.moderated, removeps-groups@yahoo.com wrote:

> ex-dividend date (is that the date
>they announced it).

The ex-dividend date is the first date FRO traded without the right
to get the distribution. Had you bought or sold the day before that
date, the sale would have included (and therefore priced in) the
right to the distribution.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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