If anyone kind enough to enlighten me on how to report stock gains after acquisition. My supplemental information says my RSUs cost basis to be 0, which should not be because we have paid the taxes when they vested. My ESPPs cost basis to be… umm some random numbers that I don’t think are correct and I don’t know from where. I have consulted with a CPA and an EA. I have called Etrade and they said to use the ESPP/RSU confirmations to adjust and they won’t issue a new 1099. But if I changed the cost basis, I think IRS will flag it. Can anyone give some insights? Thanks!
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Few observations to consider:
- In Nov of 2021 VMware paid a special dividend of $27.40. Part of that dividend was classified as ordinary and part was a return of capital. The ordinary dividend was likely reported on your 2021 1099-DIV. The return of capital is something you have to keep track of and use to adjust your basis down by that amount when liquidating shares. The return of capital amount was approx $16.58
- E-Trade reports the basis for ESPP to the IRS, hence they are reported on a 1099-B as covered. E-Trade likely adjusted your ESPP cost basis for the return of capital which is why you feel like your cost basis is $16.58 less than expected.
- E-Trade likely did not adjust the cost basis for any non-covered shares to include transactions for RSU shares. You will likely need to adjust the basis for those shares on your own.
I was told to use supplemental form. My problem is that when I checked the form, the cost basis isn't correct for the ESPP shares that I sold prior to the acquisition (I'd assume they were not impacted by 48/52 conversion). I compared each entry against the actual purchase statement of ESPP, the cost basis on supplemental form is about $16.6 lower per share compared to the actual purchase price. I think I'm going to ignore the cost basis on supplement form, and just reference the purchase statement for the actual cost. What a mess.
@2flt+1ri4hhY3
It’s really not that big of a mess. Your cost basis should it be $0, so the 100% gain is wrong, like with everyone else on here.
The loss is somewhat normal if you sold the RSU’s shortly after vesting. Cost basis for the shares is calculated in the day they vest, that’s the actual value when they become yours. That’s also reported on your W2. If you sold at the end of the day, or at a day when the share value dropped a bit, once you factor in fees paid, you can easily have a loss.
The vested RSU’s value are reported on yoir W2. So you only need to report sales of vested RSU’s. It looks complicated because the 1099 from either ETrade or Fidelity shows a $0 cost basis in the main section. If you download the supplemental document from the ETrade website, it has the corrected cost basis, Fidelity shows the correct amount at the bottom of the consolidated 1099 in their supplemental section. Enter the correct cost basis for proper net gain/loss and you’re done.
According to Broadcom Form 8937, amount of cash received for a share of VMware Common Stock is reportable gain. You use ESPP/RSU confirmation to figure out basis, add gain from 1099 and use this number as proceeds. As long as you report correct gains, you will be fine.
Can't you find this on your brokerage statement. Or just give that to your tax person
While good advice to look at the supplemental (it has more data) my supplemental is wrong too. Funny enough, my supplemental shows a loss, where my standard 1099-B shows a huge gain. Both are wrong.
It's a mess. I sent it all over to my accountant last week, it'll be interesting to see what he decides to do with it. I probably have a legit gain of around 30-40% across all the shares that were vested and cashed out. One form shows a 100% gain, the other around a 10% loss.
Etrade made a mess of this one.
Use the "Adjusted Cost Basis" on the Stock Plan Transactions Supplement. The plain old "Cost Basis" says 0, but the Adjusted Cost Basis column gives the correct amount and it is not 0 on mine. In the bottom half of the first page is the explanation:
"The Cost Basis that appears on your Form 1099-B reflects the amount paid to acquire shares, including brokerage commissions and fees. The Form 1099-B Cost Basis amount does not include amounts related to your 2023 Stock Plan Transactions that your employer reported to the IRS as ordinary income. As a result, an adjustment to the Cost Basis amount may be required to determine the basis amount that you need to report on your tax return(s)."
Prepare for an audit.
I honestly cannot believe they did it this way, the basis was there and known up until the aquisition, they just didn't carry it forward. What shows as 100K gain is probably only a tiny fraction of that. But since it's being reported as 100K gain, if your numbers are big, I suspect there are going to be a lot of audits triggered.
For ESPP look at the grant date of each purchase and you can do a google lookup of the price on that date. Make an adjustment for the discount and that will be your cost basis. When the shares were redeemed you got 48% as cash at $142.5 per share. That is the redemption price. Do a bit of math and you can calculate the capital gain. When filing your tax return you’ll need to do a manual adjustment for the 1099. Also you’ll need to select that the broker cost basis was incorrect. Select option B on the tax form. For stock that was converted to AVGO and not sold you do not need to report it from what I heard. Unless you’re reporting really big numbers the IRS will accept the return with no questions.
I bet Michael Dell is really scratching his head on this one while he is doing his taxes this year. lol.
OP here. The supplemental info from Etrade has the same info as the 1099 and I think it is wrong. I have the RSU/ESPP purchase confirmations and from those, I couldn’t figure out how they came to the numbers in 1099 and supplemental information. Also, my W-2 does not contain anything pertaining to the shares, only my paycheck.
Etrade gives you a supplemental form with the correct cost basis, use this to adjust the cost basis they put on your 1099.
You are not the first person with this issue and the IRS will see that the share cost is also reported on your W-2. I've had to do this before and never had an IRS issue.
Lie and steal, that is the way
If my calculations are different than shown in 1099, just do it with my calculations even with risk getting audited? Or my calculations are simply wrong and 1099 is always correct?
You have to calculate the cost basis on your own.
If IRS flags it for audits, you have to show your proof of purchase, taxes paid, dividends received, proof of sale price and conversion calculations. Take pen and paper and work on it. Focus on all amounts received and you should be good.