This isn't exactly a tax question, except that it relates to computing tax basis on shares of a stock.
Suppose I have two or more lots of the same stock, bought at different times and prices. As a result of a merger, I may end up with fractional shares, which are automatically sold off. However, my broker only sees the total number of shares, and the resulting fraction might not divide up evenly among the lots.
For example, suppose I have lots of 10 shares and 100 shares. After a
3 to 1 merger, I end up with 3 1/3 and 33 1/3 shares. But the broker sees 110 shares, converted to 36 2/3 shares, and sells of 2/3 share, leaving me with 36 shares. How do I divide that among the two lots?
If I'm not mistaken, the rule when shares are sold is that the oldest shares are sold first. Then assuming the lot of 10 shares was the oldest, I would attribute the 2/3 share to that lot, which would end up with 2 2/3 and 33 1/3 shares in the two lots. That adds up to 36, but it's annoying to have to carry around those fractional shares in my records from now on. Is there any way to avoid this? Can I apportion the 2/3 share sale as I like, in order to make the lots come out whole numbers?
Or, suppose I had 10 shares and 20 shares. Then a 3 to 1 merger would leave me with an even 10 shares total, so there would be no fractional sale. But my lots woult be 3 1/3 and 6 2/3 shares. Am I stuck with that?
None of this is a big deal. It's just annoying.
-David