recycled_dnd OP t1_j6o5eur wrote on January 31, 2023 at 6:38 PM

Reply to comment by micha8st in Investment in Private company that was bought out, 1099-B can't determine cost basis by recycled_dnd

>Who's issuing the cash payments? I'm asking about the Aug 2022 payout.

A third party bank that handled the sale/merger called PNC Financial Services

>but it's not clear where that 400 came from.

Yeah the other person I know who was invested in the company doesn't know either. I still have the paperwork from the $400 payment and it just says:

"REMITTANCE DETAILS

This payment has been issued as as part of the transaction below:

Company B - Company A"

>Unless they formed a partnership

Company B bought Company A outright, their operations are being integrated into Company Bs and company A "no longer exists" it's employees were absorbed into Company Bs or terminated

micha8st t1_j6o77pl wrote on January 31, 2023 at 6:49 PM

I've been involved in two M&A where a public company was bought by another public company, and part of the deal was cash -- in both cases we got a cash lump they called a "special dividend" plus stock in the purchasing company.

One is my employer, so for privacy reasons I won't give you any info there.

The other is Terra Industries being bought by CF Industries. I can get back to you tonight with how I handled both of those. I think in both cases the guidance we received was that the cash dividend was treated as a dividend, and 100% of the basis in the little-fish ended up in the basis for the big-fish.

recycled_dnd OP t1_j6o7qyn wrote on January 31, 2023 at 6:52 PM

Thank you for your replies!

Upset-North-2211 t1_j6o9xix wrote on January 31, 2023 at 7:06 PM

I would split the investment into 2 chunks $5k each and use 1 chunk against the $7.5k cash payout. Hold the 2nd $5k as the cost basis of the received stock. The $400 payout is like a dividend, so cost basis is $0.