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Need tax basis caused by spinnoff, Chapter 11, merger, and sale.
I owned Southern Co stock and from a 04/02/2001 spinoff received 271 shares of Mirant Corp stock @ $14.50/sh. On 01/03/2006 Mirant emerged from Chapter 11. At that time the "old" Mirant stock was canceled and "new" Mirant stock was issued at rate of 0.027100875 shares per 1 old Mirant share, which gave me 7 shares of new Mirant stock.
On 09/13/2010 Mirant Corp and RRI Energy merged and has become GenOn Energy. From the merger I received 2.835 shares of RRI stock for each share of my Mirant stock, which gave me 19 shares of GenOn stock, which I sold on 12/20/2010 and netted $52.26 on the sale. How to I calculate tax basis on this? Do I have a Long Term Loss based on my original Mirant value of $$3,931(+/-)? Thanks... |
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You need to contact Southern Company to ensure that the basis of the original spin-off stock was in fact $14.50 per share for a total basis of $3,929.50. The actual basis may in fact be the difference between the value of your Southern Company stock the day BEFORE the spin-off and the value the day AFTER the sp[in-off.
If confirmed, then, yes, your long-term loss would be the proceeds of the sale minus the basis, whatever it is. |
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Your cost basis in the old Mirant is 38.91% times your original cost basis in Southern Co - I found that from this web site regarding the spin off Mirant: http://investor.southerncompany.com/faq.cfm?faqid=3 Use this figure for your cost basis of the GenOn stock. This assumes that you did not previously repport any gains or losses from the cash in lieue of stock that you should have received for partial shares of either the new Mirant or the GenOn. |
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Deak - please use the answer box to ask follow-up questions, not the comment box. No , the bankruptcy and later reissue of Mirant does not affect your original basis - UNLESS you wrote off your original stock purchase as a loss when the old Mirant went bankrupt. |
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