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Problems impacting holders of WMV through merger

There've been various issues and confusion around the Broadcom acquisition of VMware. This page collates the most common issues, identifies impacted groups, and details the impact and any known remediations.

$0 cost basis on 1099-B and incorrect adjustment in Supplement

The 1099-B and Supplement both have a cost basis of $0 for all lots Stock Plan lots. While this is technically correct for RSUs, as you did not pay anything for them, your tax basis is the Fair Market Value at time of vest as you paid taxes on the RSUs at that time.

The primary issue here isn't the basis info in the 1099-B - it's the lack of correct info in the Supplement. I found this on Vanguards site noting they aren't required to make certain adjustment, and for them they don't for cross-account wash sales, or for gift tax.

We're suffering from an expectation mismatch with what eTrade are obligated to and what we need from them, and it's exposed a potential complication to filing we were unaware of. This should feed into decisions of what brokers to use, but I don't think there's an actual lapse of duty. I do think providing a supplement with incorrect numbers is leading holders into error as there's no point in the supplement if the numbers cannot be used in Frm 8949.

The adjustment present in my eTrade Supplement is the original cost basis of VMW, but a tax basis must account for the Return of Captial from the Dell distributions:

  • 2018-12-27 - reduce basis by $10.18 per share of VMW
  • 2021-10-29 - reduce basis by $16.87 per share of VMW

Groups:

  • eTrade Stock Plan account holdings AND
  • holding VMW since before 2021-10-29

Impact:

  • all cash proceeds recognized as gain without unless reporting an adjustment on Form 8949
  • use of Supplement values as adjustment will overstate cost basis resulting in underpayment of tax
  • lots of frustration and confusion around how to get a correct Form 8949 or the inputs to such

Incorrect code ‘N’ in Form 8949 generated by TurboTax

TurboTax is adding code N in column (f) which is described as:

You received a Form 1099-B or 1099-S (or substitute statement) as a nominee for the actual owner of the property and Report the transaction on Form 8949 as you would if you were the actual owner …

TurboTax acknowledged the issue.

Groups:

  • TurboTax users who auto-imported their Etrade 1099-B

Impact:

  • incorrect Form 8949 - need to delete and re-enter values manually

Treatment of proceeds as dividend

The cash proceeds from the merger were treated as a dividend instead of “cash to boot”.

Groups:

  • non-resident aliens - if you file a W-8 BEN with the US, this is you
    • ? was this specific to eTrade or did other brokers do the same?

Impact:

  • (tentative) cash proceeds were taxed as dividend rather than capital gain
  • (tentative) difficulty reclaiming withheld taxes from IRS
  • (tentative) no deferral of taxes though application of tax basis

Fractional share sold at incorrect price

Any fractional share of AVGO after the merger and conversion was sold per the terms in Form 8937, which specified a price of $979.50 (FMV at time of merger). eTrade sold these fractions multiple days after at $904.79.

Groups:

  • eTrade account holders

Impact:

  • a tiny loss - the maximum possible loss is if you had 0.999 of a share (rounding seems to be to 3dp), equaling $75.61