Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
Fractional Shares and Remaining Cost Basis
I previously owned LU stock which has gone through various mergers and acquisitions resulting in fractional shares of stock where were sold by three brokerages. I have losses on the all the shares.
Due reverse splits some of the shares became 400-600 $/share, but I used a zero cost basis when filing the loss of the fractional sale. The remainder of the stock was sold in 2016. Since my income was < $2000/year from 2014 I was not required to file, but I want to complete the Sch D worksheet for carry-over losses. I am considering filling for 2016, so the losses will not just appear when my income increases in the future.
Can fractional basis remain with the converted shares when I file/record the loss or must I subtract out the fractional basis from the total cost basis?
Re: Fractional Shares and Remaining Cost Basis
Don't know the real answer but would guess that you should subtract out the fractional basis.
Reason is along the lines that IRS requires you to use losses each yr and you cannot pick and choose when to use them to benefit you. For example in a low income year you might choose to not use basis to give you a gain taxed at 0% and then use the basis in a future higher income year to reduce gain/taxes.
In a similar manner, IRS does not allow you to use basis in TIRA at a time of your choosing but you must take that into account each yr you make withdrawals.