Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
how to deal with questionable 1099-B reporting
Posted by: deedee8712, March 13, 2017 02:22AM
Vanguard Brokerage Services (VBS) provided an erroneous 1099-B and refuses to correct it despite my written complaints. What do you recommend I do?
I owned 1000 shares of PMCS which was acquired by MSCC for $9.22 cash plus 0.0771 shares MSCC. MSCC closed at $29.77 on the takeover date. VBS reported a disposition of 1000 shares PMCS for $11.52 per share on the takeover date (11.52 = 9.22 + 0.771*29.77).
When I sold 77 shares of MSCC a few months later they reported a STCG.
I think the correct accounting would be to apportion most of the original PMCS basis to the cash paid on the takeover date and the rest to the MSCC shares which would inherit the acquisition date of the PMCS shares. Then when the MSCC shares were sold it would be a LTCG. I contacted MSCC IR but they refused to help or provide documentation how to split the basis for the takeover. They have no info on the IR web site. VBS also refused to help.


Re: how to deal with questionable 1099-B reporting
Posted by: kaneohe, March 13, 2017 03:33AM
Is it in here? I usually get something like this in the mail [www.sec.gov]

see p. 12 regarding taxes. Agree w/ you that the date acquired would be taken from your original purchase of the original ancestor shares. I would just provide the correct info and be prepared to defend it.


Re: how to deal with questionable 1099-B reporting
Posted by: kaneohe, March 13, 2017 04:44AM
from the 8949 instructions: Looks like you can correct the ST/LT error............

"IF . . . . .
You received a Form 1099-B (or substitute
statement) and the type of gain or loss
shown in box 2 is incorrect .........
(COMMENT: Box 2 is short term or long term)

THEN enter this code
in column (f) .
T

AND
Report the transaction on the correct Part of Form 8949,
and enter -0- in column (g) on that Part of the form if there
are no adjustments needed for the transaction"

Re: how to deal with questionable 1099-B reporting
Posted by: assassin, March 13, 2017 02:12PM
Quote:
I contacted MSCC IR but they refused to help or provide documentation how to split the basis for the takeover. They have no info on the IR web site.


sure they do:
[investor.microsemi.com]

as for holding date, i think that the merger being taxable is what resets it to the merger date:
[fairmark.com]

(LJM knows his stuff on this; i've used a couple of his posts to make sense of non-taxable mergers.)

Quote:
I think the correct accounting would be to apportion most of the original PMCS basis to the cash paid on the takeover date and the rest to the MSCC shares which would inherit the acquisition date of the PMCS shares.


where are you coming up with this? if part of the merger had been classified as an "Exchange" and part as a "Redemption" (as was the case with DELL/EMC merger), then i could see the reasoning in separating. but otherwise, the $9.52 cash and the 0.0771 MSCC shares are part of the same merger consideration.

now, where you might have to apportion basis is the cash-in-lieu of 0.1 fractional shares you received. in a non-taxable merger, (0.1/77.1) of the basis of each share lot you owned would be allocable to this fractional share. i don't know offhand how to handle this in a taxable merger. because you're treated as selling the old stock and buying the new one, maybe such complexity is unnecessary.

anyway, you still need to have the 0.1 share listed somewhere. how much cash were you paid for this?

to recap: Form 8937 is very helpful; merger being taxable is probably main thing throwing you; need further info on cash-in-lieu.

Re: how to deal with questionable 1099-B reporting
Posted by: kaneohe, March 13, 2017 08:34PM
deedee8712 Wrote:
-------------------------------------------------------
................................
> When I sold 77 shares of MSCC a few months later
> they reported a STCG.
.........................
>
>

My original response was incorrect.
I believe that they (and assassin)are correct. from
p. 139 in the link I provided:

"A U.S. holder’s holding period in the shares of Microsemi common stock received begins the day after shares of PMC common stock are exchanged for shares of Microsemi common stock and cash. The U.S. holder’s basis in the Microsemi common stock received will be equal to its fair market value at the time the offer is consummated or the merger is effective, as the case may be."


Re: how to deal with questionable 1099-B reporting
Posted by: deedee8712, March 14, 2017 01:03PM
assassin, thanks very much for the link to the Form 8937. the 1099-B makes sense now (three transactions: cash+stock, cash-in-lieu, MSCC STCG). I'm surprised and disappointed that neither MSCC IR nor VBS could not help me find this info.

kaneohe, MSCC IR did point me to an S-4 doc, but when I asked them for a post-acquisition doc they did not respond.



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