1099-B for partial shares from Honeywell Spin-off

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  • #2403
    haroldml
    Participant

    I received 1099-B forms for the fractional shares from Honeywell’s Spin-off of Garrett Motion & Residio Technologies. No cost basis is shown on those forms so the total is taxable. Calculating the cost basis is problematic because I’ve owned the Honeywell shares for years, receiving dividend checks for all those years, plus the fact that the 1282 Honeywell shares comprise three separate lots. For the Residio spin=off, I received one Residio share for each six Honeywell shares on the record date of 10-16-18 with a payable date of 10-29-18. The Direct Registration Statement, as of 10-26-18, shows a Market Value Price of $27.8500 for 213 shares. The check for the fractional share is for $17.20 for 0.667 share. Please explain how to calculate the cost basis for this payment.

    The Garrett Motion 1099-B is a similar transaction.

    Thanks for any help that you can provide,

    Harold

    #2405
    Kaye Thomas
    Moderator

    Unless I had reason to believe the basis was high enough to produce a valuable capital loss, which seems unlikely, I would report zero basis rather than go through the brain damage of trying to work out a precise answer that might save me a dollar or two. IRS will never object to zero basis.

    #2406
    haroldml
    Participant

    Thanks Kaye,

    You make a valid point.

    Harold

    #2408
    haroldml
    Participant

    I hope you can help me with something else regarding these transactions. I think that since the Honeywell shares were held long-term that the TTax entry for those fractional shares should be long term, cost basis not known. However, since the date that the partial shares were acquired & sold are close to each other, the IRS might frown on entering this as a long term transaction. How should this be handled?

    Thanks again,

    Harold

    #2415
    kaneohe
    Participant

    I would think the Thomas rule (that time is money) would apply equally here. If you report as LT you pay 15% perhaps on the gain. If you report as ST you pay perhaps 24% so the difference is 9% on $17.

    Are the dates you are seeing on the 1099B? I’m a bit surprised because
    I had a similar situation (different securities) with a small CIL caused by selling a fractional share from a merger/spinoff. I think the acquisition date may not be correct since there were several such transactions over the yrs but they took an acquisition date from a prior spinoff and that one was long term……..maybe because it was covered at the time.

    I wonder if the fact that cost basis is unknown by itself implies a LT transaction since otherwise broker should know the basis? I guess I would report as LT and let IRS decide if they wanted to spend the time & effort to possibly gain 2 bucks.

    #2419
    haroldml
    Participant

    Thanks Kaneohe,

    These cash in lieu of fractional shares is more trouble than it’s worth in my opinion, given the small amounts involved. This is what the 1099-B states: “Box 5: Non-covered Securities Transactions for which basis is not reported to the IRS and for which short-term or long-term determination is unknown by EQ Shareowner Services. You must determine short-term or long-term based on your records and report on Form 8949, Part I with Box B checked, or on Form 8949, Part II with Box E checked, as appropriate.” I read that, when cash in lieu of fractional shares is involved that the acquisition date of the original shares should be used. In this case, that would be the date the original Honeywell shares were acquired in the late-1970s I think it was. And, there are three different lots acquired on different dates. Since then, there have been several different transactions including the merger with Allied Signal. So, it seems to me that long-term would apply with the acquisition date as Various. However, because the amount involved is so small, classifying it as short-term Non-Covered doesn’t change the tax situation in this instance. For short-term, the date sold is shown on the 1099-B as 10/29/2018 but the date acquired is difficult to determine. Since the Direct Registration Account Statement lists October 26, 2018, I can use that date as the acquisition date.

    Any other thoughts?

    Thanks,

    Harold

    #2420
    kaneohe
    Participant

    I too believe the original acquisition date should be used so, depending on how your time is worth…not much for me, I would break it out separately as LT on the 8949 and make 2 bucks.

    Should EQ know you held the original shares LT? If so, I would let them know they should know and why so that perhaps things could be better in the future. Just to be sure I rechecked my 1099B….similar to yours it shows a 3 day period between sale of ExpressScripts and then sale of the fractional CIL Cigna share……..but in this case, Schwab had acquisition date of 2003 so they did it right.

    #2421
    haroldml
    Participant

    Thanks for your help.

    #2422
    haroldml
    Participant

    Thanks to all. I looked at my basis calculations for the Honeywell/Allied Signal merger in 1999 I think it was & confirmed that I have several lots of the shares of the new Honeywell International company. (The original Honeywell shares were acquired in the late 1970s as I think that I mentioned previously.) So, since I’m concerned about using Various for the Date Acquired for the cash in lieu of fractional shares, I’m just going to use the short-term version. It didn’t change the tax calculation. I don’t think that it’s worth taking a chance that I’d receive a letter from the IRS.

    Thanks again,

    Harold

    #3177
    tmvatcher
    Participant

    I am late to this … but, I have the same issue with the spin-off shares reported from Equity Trust. I also have some shares that are held under Morgan Stanley. On those, they provided the acquired date for the Honeywell Shares so that they were reported as long term. They also had a cost basis for me. Based on that, and the fact that the ET shares were held much longer, I went with a cost basis of 0 and used long term.

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