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1099B Cash in Lieu - how to report?

 
 
Anthony
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      02-03-2005, 07:06 PM
On my 1099B from Ameritrade there are 2 entries (approx.
$75) with the following details

4/8/04 st. paul travelers 'cash in lieu' $75 approx

I understand that this must be reported. My question is how
do I report this income? Thanks so much

anthony
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Joe Morris
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      02-07-2005, 06:38 PM
Anthony <(E-Mail Removed)> writes:

> On my 1099B from Ameritrade there are 2 entries (approx.
> $75) with the following details
>
> 4/8/04 st. paul travelers 'cash in lieu' $75 approx
>
> I understand that this must be reported. My question is how
> do I report this income? Thanks so much


That's likely to be the result of your having had stock in
Travelers when it merged with St. Paul; your Travelers
holding didn't translate to an integer number of STA shares,
so the fractional share was sold rather than being included
in your new STA holding.

The CIL is reported on Schedule D as the sale of a
fractional share (identify it as something like "CIL
fractional share St. Paul Travelers"). Sale date is the date
the merger closed (4/8); the purchase date is the date you
acquired the Travlers shares (or the date upstream when you
acquired the shares that became Travelers shares).

As for the basis...I've seen conflicting guidance (and I am
*not* a tax professional) as to whether one must actually
determine the basis for the fractional share (and reduce the
basis of the remaining shares by that amount), or if you can
report a zero basis for the fractional share and thus
simplify your calculations both for this year's return and
when in the future you do sell your STA holding at the cost
of a few dollars extra tax this year.

Joe Morris

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news.erols.com
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      02-07-2005, 06:57 PM
"Anthony" <(E-Mail Removed)> wrote:

> On my 1099B from Ameritrade there are 2 entries (approx.
> $75) with the following details
>
> 4/8/04 st. paul travelers 'cash in lieu' $75 approx
>
> I understand that this must be reported. My question is how
> do I report this income? Thanks so much


I presume this refers to cash in lieu of fractional shares.
You would report this as the proceeds of a sale on schedule
D and report your cost for the proper fraction of one share
as your basis. Hope this helps.

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DORFMONT@aol.com
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      02-09-2005, 05:14 AM
In the case of an insurance company being demutualized, the
basis in the CIL distribution is usually zero and the
company will tell its policyholders that it is. This appears
to be a merger in which there may be basis other than zero.
You have the option of using zero basis or actually
computing a basis in the fractional share that has been
cashed out. The math may not be worth the extra taxable
income.

Linda Dorfmont E.A., CFP, CSA

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Dan Lanciani
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      02-10-2005, 05:54 AM
(E-Mail Removed) (Joe Morris) writes:
> Anthony <(E-Mail Removed)> writes:


>> On my 1099B from Ameritrade there are 2 entries (approx.
>> $75) with the following details
>>
>> 4/8/04 st. paul travelers 'cash in lieu' $75 approx
>>
>> I understand that this must be reported. My question is how
>> do I report this income? Thanks so much


> That's likely to be the result of your having had stock in
> Travelers when it merged with St. Paul; your Travelers
> holding didn't translate to an integer number of STA shares,
> so the fractional share was sold rather than being included
> in your new STA holding.


I also had some Travelers (class A & B) and thus received
similar cash in lieu. My holdings are at Fidelity. The
first interesting thing about this merger was that I
received _nothing_ in the way of literature. In the past,
every time something like this has happened I have received
agonizingly detailed documentation along with a statement
that I was supposed to attach to my tax return.

> The CIL is reported on Schedule D as the sale of a
> fractional share (identify it as something like "CIL
> fractional share St. Paul Travelers"). Sale date is the date
> the merger closed (4/8); the purchase date is the date you
> acquired the Travlers shares (or the date upstream when you
> acquired the shares that became Travelers shares).


That's how I have done it in the past. I was a little
surprised to find that Fidelity's tax reporting detail sheet
(not reported to IRS--for my convenience only showed the
sale and acquisition dates as the same, i.e., the date of
the merger. It also explicitly identified the profit as
short-term capital gain.

> As for the basis...I've seen conflicting guidance (and I am
> *not* a tax professional) as to whether one must actually
> determine the basis for the fractional share (and reduce the
> basis of the remaining shares by that amount), or if you can
> report a zero basis for the fractional share and thus
> simplify your calculations both for this year's return and
> when in the future you do sell your STA holding at the cost
> of a few dollars extra tax this year.


Fidelity reported the basis as $0 (not even "n/a"). I'm
very tempted to assume that they know something I don't and
report it as a short term gain with zero basis.

Dan Lanciani
ddl@danlan.*com

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