I think I know the answer to this, but I want to make sure before I hit the ‘send’ button to the IRS.
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A long time ago (but in this galaxy), I found myself in possession of 1 SGP certificate
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After a 2-for-1 split, I owned 1 certificate + 1 share in direct registration with dividends being reinvested
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In 2009, I owned 1 certificate + 5.0883 shares in direct registration when SGP changed its name to New Merck and merged with Merck. Here is where my puzzle begins to knit itself. The certificate was being stored hundreds of miles away from my location due to a temporary assignment; a third party was living in my house dealing with some of my mail; etc. In short, I neglected to get the SGP certificate exchanged for New Merck stock in 2009. What I had in DR was exchanged as retaining 0.5767 of each share of SGP common stock + $10.50 for the remaining 0.4233. I opted not to continue dividend reinvestments. My inventory became 1 SGP certificate + 3 shares of New Merck.
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Fast forward to 2021. Merck spun off Organon. I received $9.99 in lieu of owning 0.3 shares of Organon stock. Now I have 3 shares of Merck with a new cost basis and a massive windfall of $10 that I need to account for on my 2021 taxes.
In early 2022, I finally retrieved the SGP certificate from storage and filled out the paperwork to exchange it for $18.25. (My original cost basis in that specific share was $113.56 before adjusting for split and merger).
The 8937 form suggests “Merck shareholder’s pre-distribution tax basis in each Merck shares should be allocated 95.23% to the Merck share and 4.77% to the Organon share received (including any Organon fractional shares for which cash was received) with respect to the Merck share” based on the closing price of both stocks the day after the spin-off and then it shows a couple of calculation examples.
That part is straightforward enough. What I’m second-guessing myself about is whether I’m supposed to include the 1 share of SGP in my basis calculations for the Organon spin-off since it should have been exchanged in 2009 and also because I did not receive any additional fraction of a share of Organon due to its existence.
I still have the original cost basis instructions Merck posted in 2009, but what I don’t have are my 2009 tax documents to remember how it was handled at the time.