Tax Implications of Broadcom VMware Merger for Stockholders

Thanks for the explanation! Does this mean if I go with the 50/50 option, I'd only pay taxes now on the cash portion and the stock conversion would basically be tax-deferred until I sell the Broadcom shares? Also, would any different rules apply since some of my shares came from an ESPP with discounts?

Yes, with the 50/50 option, you'll only pay taxes now on the cash portion you receive. The stock conversion portion is tax-deferred until you eventually sell those Broadcom shares. For your ESPP shares, there are additional considerations. If you received a discount when purchasing them (typical in ESPPs), any portion of your gain attributable to that discount might be taxed as ordinary income rather than capital gains, depending on how long you've held them and whether it was a qualified or non-qualified disposition. I'd recommend reviewing your specific ESPP plan documents and possibly consulting with a tax professional who can analyze your specific purchase dates, holding periods, and the discount applied to each lot of shares.

Does the taxr.ai tool handle special situations like ESPP purchases with discounts? I also have some incentive stock options that were converted to shares before this merger was announced and I'm worried about AMT implications.

I'm a bit skeptical about these types of services. Do they actually give personalized tax advice or is it just general information you could find anywhere? And do they have real tax professionals reviewing the documents?

Yes, the tool specifically handles ESPP purchases with discounts. You can identify which lots came from ESPP purchases and it will factor in the discount when calculating your taxable gain. It also accounts for qualifying vs. disqualifying dispositions based on your holding periods. Regarding personalization, it's not just general information. It analyzes your specific documents and provides calculations based on your actual holdings, purchase dates, and cost basis. There are tax professionals behind the system who designed the algorithms, though the initial analysis is automated. You can also request a review from their tax team if your situation is particularly complex.

How does Claimyr actually work? Do they just call the IRS for you or something? I've been on hold with the IRS for literally hours trying to get answers about stock conversions.

This sounds too good to be true. The IRS wait times are notorious, especially during tax season. I find it hard to believe any service could get you through that quickly. And even if you did get through, would a random IRS rep really be knowledgeable about specialized stock conversion tax rules?

They don't call the IRS for you - they secure a place in line and then call you when they're about to connect with an IRS agent. It's basically a sophisticated system that navigates the IRS phone tree and waits on hold so you don't have to. The IRS representatives I spoke with was definitely knowledgeable about stock conversions in corporate reorganizations. I asked specific questions about my VMware shares and received detailed guidance on how to report both the taxable cash portion and the tax-deferred stock conversion. The rep even directed me to the specific IRS publications that cover these situations. I was pleasantly surprised by how helpful they were once I actually got through to someone.

Can you explain more about how wash sale rules might apply in a merger situation? I did buy some additional VMware shares about 3 weeks ago when I heard the merger was finalizing.

The wash sale rules can apply if you sell shares at a loss and then buy "substantially identical" securities within 30 days before or after the sale. In a merger context, if you're taking the cash option for some shares (which is essentially selling them) and those shares would be sold at a loss, buying additional VMware shares within that 61-day window could trigger the wash sale rules. It gets complicated with mergers because you need to determine if the new Broadcom shares you're receiving are considered "substantially identical" to the VMware shares. Generally, in a reorganization like this, they might not be considered identical, but it's a gray area that depends on specific facts and circumstances. If you're concerned, it would be worth consulting with a tax professional who can look at your exact transaction dates and amounts.

My broker (Fidelity) said they'll provide a specialized 1099-B that will show the cash portion as a sale with proceeds and cost basis. For the stock conversion portion, they'll transfer your cost basis to the new shares and note that it was part of a tax-free reorganization. You should get a detailed statement explaining everything in January that you can use for your taxes.

This is really helpful! I was wondering about the basis calculation. Just to make sure I understand - if I have VMware shares from different purchase dates with different cost bases, do I need to track the conversion for each lot separately? For example, if I have 50 shares at $40 basis and 50 shares at $60 basis, would the converted Broadcom shares maintain those different basis amounts proportionally?

@4870c5506e2b Yes, you're absolutely correct! You need to track each tax lot separately through the conversion. Each lot of VMware shares maintains its own identity with its specific purchase date, holding period, and cost basis. So in your example: - Your 50 shares at $40 basis ($2,000 total) would convert to 12.6 Broadcom shares (50 × 0.2520) with a basis of $158.73 per share ($2,000 ÷ 12.6) - Your 50 shares at $60 basis ($3,000 total) would convert to 12.6 Broadcom shares with a basis of $238.10 per share ($3,000 ÷ 12.6) The holding period for each converted lot also carries over from the original VMware purchase dates. This lot-level tracking is crucial for determining whether future sales qualify for long-term vs short-term capital gains treatment, and for calculating the correct gain/loss when you eventually sell the Broadcom shares. Most brokers will handle this automatically, but I'd definitely recommend keeping your own spreadsheet as backup documentation!