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Posted by Ira Smilovitz on April 20, 2008, 9:04 am
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> This isn't exactly a tax question, except that it relates to computing
> tax basis on shares of a stock.
>
> Suppose I have two or more lots of the same stock, bought at different
> times and prices. As a result of a merger, I may end up with
> fractional shares, which are automatically sold off. However, my
> broker only sees the total number of shares, and the resulting
> fraction might not divide up evenly among the lots.
>
> For example, suppose I have lots of 10 shares and 100 shares. After a
> 3 to 1 merger, I end up with 3 1/3 and 33 1/3 shares. But the broker
> sees 110 shares, converted to 36 2/3 shares, and sells of 2/3 share,
> leaving me with 36 shares. How do I divide that among the two lots?
>
> If I'm not mistaken, the rule when shares are sold is that the oldest
> shares are sold first. Then assuming the lot of 10 shares was the
> oldest, I would attribute the 2/3 share to that lot, which would end
> up with 2 2/3 and 33 1/3 shares in the two lots. That adds up to 36,
> but it's annoying to have to carry around those fractional shares in
> my records from now on. Is there any way to avoid this? Can I
> apportion the 2/3 share sale as I like, in order to make the lots come
> out whole numbers?
No, the "annoying" way is correct.
> Or, suppose I had 10 shares and 20 shares. Then a 3 to 1 merger would
> leave me with an even 10 shares total, so there would be no fractional
> sale. But my lots woult be 3 1/3 and 6 2/3 shares. Am I stuck with
> that?
Yes.
Ira Smilovitz
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