Cash In Lieu of Fractional Shares
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Cash In Lieu of Fractional Shares Eric Polk
asked,
Our investment club received a
fraction share payment of cash when a stock splitted that we owned. I am
confused about if that payment amount is recorded as a dividend payment or is it
a net short term capital gain. If it is a net short term capital gain would I
file that in form schedule 1065 schedule K on line 4e.
Cash in lieu of fractional shares should be thought
of as two transactions rolled into one. It should be treated
as though you actually received the fractional shares and then immediately sold
them. Therefore, any gain or loss related to the sale of these
fractional shares should be reported as such on line 4(d) or line 4(e) of Form
1065 Schedule K, as appropriate for the holding period of the applicable
fractional shares sold.
Jerry Dressel
St.Louis, Missouri
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