I have a question regarding cost basis on a stock that was bought out for cash, but instead of receiving all cash, I received part cash/part stock.

I purchase 200 SUN for 25.49 a share.
ETP agreed to purchase SUN offering either $50 cash, 1.0490 ETP per share of SUN, or a combination of $25 in cash and 0.5245 ETP common units for each SUN share.

Merger was completed on 10/9 and I opted for the all cash offer, but instead of receiving $10000, I received:
$5293.33 cash
98 shares ETP
$31.72 (partial from 1 share of ETP)

The broker informed me that due to over demand for the cash option, they were only able to give me partial cash and the rest in ETP shares.

My question: When I file my taxes what is my cost basis for the $5293.33 cash received from the merger.

I'll go out on a limb here:

It seems that you have to determine how many shares of SUN were sold. So if you take the 98 and divide by .5284 you would get 186.84 shares of SUN stock converted to ETP. Then I would take 13.16 shares (200-186.84) using the basis if $25.49 for a total basis on the sale of 335.44.

You should receive something from either SUN or ETP on how to handle the transaction. If you do not you might need to contact investor relations to review how the transaction should be handled. But with the information given I would proceed as above.

Hopefully this is long-term capital gain, and if you are in the 15% bracket it won't make any difference on the federal return.

The calculation CANNOT be precise without knowing the value of the ETP stock at the time you effectively received control of the 98 shares of ETP.

Assuming a cost of $47.66 per share of ETP, the value of the shares is $4,670.68. You also received $5,325.05 in cash, for an effective payment of $9,995.73.

$5,325.05 is 53.27% of the effective payment, so your basis is 53.27% of your original basis of $5,098, which is $2,715.70.

The remaining $2,382.30 is your basis for the 98 shares of ETP when you decide to sell those shares.

A change in the value of the ETP shares will modify the calculations somewhat, but not excessively so.

Thanks for the input. I was thinking, could I just do 50x=5293.33 where x is number of shares of SUN that was converted to cash. X would = 105.8666 then multiply by 25.49 for a cost basis of 2698.54? For the remaining shares of ETP 200-105.8666 = 94.1334 for the number of shares of SUN converted to ETP. When I sell the ETP my cost basis would then be 94.1334 x 25.49 = 2399.46
Thanks for any additional input.

Truthfully, your methodology would probably be considered valid by the IRS, because, however much the basis is increased or decreased for this sale, the basis for the ETP shares adjusts proportionately, as long as the original basis of $5,098 does NOT change.