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Stock Cost Basis issues for former and current HP and HPE employees.

1. Find all your stock   Other stock topics   (Not officially endorsed or supported.)

Question? Email: info@hpalumni.org  (Mar 27, 2024) 

Perspecta. For stock cost basis information about the purchase of Perspecta by Peraton, go to hpalumni.org/StockPerspecta

Fundamentals

Inherited stock, unlike gifted securities, is not valued at its original cost basis. When an individual inherits a stock, its cost basis is stepped up to the value of the security at the date of the inheritance.

Donating stock. "If you are planning donations to charity anyway, you may be able to avoid having to figure out the basis for stocks by just donating the stock. Check with an accountant or tax advisor for details or possible pitfalls. Saved me a lot of grief." --HPAA member

Your HP, HPE, and spinoff stock is probably not all held in one place. Records at plan administrators and stock brokerages often don't have the original acquisition date and correctly-calculated current cost basis for each lot of acquired shares -- a major impact on what they report to the IRS when the stock is sold. An "Unknown" basis defaults to $0. You can easily wind up paying taxes twice on the same transaction.

You may now have stock in HP, HPE, Agilent, Keysight, or DXC in multiple accounts – and may not have received cash payouts for MFGP or PRSP. Your current cost basis depends on when you acquired stock as companies were merged and spun out. Plan administrators, transfer agents, and brokerages vary significantly in how (or if) they track gain/loss and cost basis for the many complex HP-related stock events – and what (if anything) they report to the IRS.

- If you owned any HP stock on 2000-05-02 (May 2, 2000) -- and have not sold all of it -- as of March 2023 you would have stock in six companies: HPInc, Agilent, Keysight, Hewlett Packard Enterprise, DXC, and Micro Focus. You received cash and replacement stock in April 2019 from the Micro Focus "Return of Value." You were paid cash in May 2021 for your former stock in Perspecta.

- If you owned any HP stock on 2015-10-21 (Oct 21, 2015) -- and have not sold all of it -- as of March 2023 you would have stock in four companies: HP Inc, Hewlett Packard Enterprise, DXC, and Micro Focus. You received cash and replacement stock in April 2019 from the Micro Focus "Return of Value." You were paid cash in May 2021 for your former stock in Perspecta.

You could pay taxes twice on the same income. At the time you acquired employee stock, you paid income tax on the company contribution. If you sell stock, the broker will use the cost basis in their records (which should not be "unknown" -- i.e. $0) to report your apparent profit to the IRS.

The original cost basis info for your early HP Employee Purchase shares has been lost. (Long-time HP employees may have old statements from HP's previous transfer agents: Harris Trust, Computershare (which bought the Harris stock registry business), BNY Mellon, then Computershare again. Employee purchase administration is now at Fidelity NetBenefits.)

Companies are required to turn over unclaimed property to the state after a specific time period, as little as two years in some states.  If a stock dividend check is not cashed -- and there are no other transactions that were initiated by you on the stock account -- by law, the "unclaimed" timer generally starts. To check for lost stock and uncashed checks: https://www.hpalumni.org/Unclaimed.

1. The Basics.

Schwab has a clear, well-organized "Cost Basis Fact Sheet" -- which covers Employee Stock Purchase Plans, options, and various forms of stock-related equity awards.
https://www.schwab.com/public/file/P-5799523   [link updated Jun 24, 2024]

(Of course, the authoritative source is IRS Publication 550 "Investment Income and Expenses (Including Capital Gains and Losses)"
https://www.irs.gov/publications/p550  )

Why is cost basis tracked by your broker for more recent purchases?
"Policy reforms introduced after the financial crisis require banks and brokerages to report adjusted cost basis for stocks bought after 2010..."
https://www.schwab.com/learn/story/save-on-taxes-know-your-cost-basis#  [link checked Jun 24, 2024]

2. The IRS has a form to help you deal with cost basis discrepancies.

"Use Form 8949 to reconcile amounts that were reported to you and the IRS on Form 1099-B or 1099-S (or substitute statement) with the amounts you report on your return. The subtotals from this form will then be carried over to Schedule D (Form 1040), where gain or loss will be calculated in aggregate."
https://www.irs.gov/forms-pubs/about-form-8949

See the clear table on page 6 of the 8949 instructions: "You received a Form 1099-B (or substitute statement) and the basis shown in box 1e is incorrect."... or "You received a Form 1099-B (or substitute statement) and the type of gain (or loss) shown in box 2 is incorrect"
https://www.irs.gov/pub/irs-pdf/i8949.pdf See Page 8.

3. How to correct your broker's records to include lot-by-lot cost basis data.

You can then specify which lots of stock to sell -- the more profitable shares or the less-profitable ones. (In addition to not having to file the special form.)

For example, here's Fidelity's discussion: " Selling specific shares gives you more control over the gain or loss realized by a sale."
https://www.Fidelity.com/webcontent/ap002390-mlo-content/19.09/help/learn_trading_specific_shares.shtml

Fidelity: You can do it online. "How to Change Your Cost Basis Information. You can make these changes online and they are reflected in your account that day."
https://www.Fidelity.com/customer-service/how-to-change-your-cost-basis-info 
"A few years ago after talking to Fidelity I was asked to scan and email the original purchase-date-and-cost documents. Within a couple of days the cost basis info had been updated for all the different shares. (Including the splits and spinoffs for my original HP shares, which were missing the cost basis info when transferred from Computershare to Fidelity)."
--David

Merrill Lynch: Use form. "Cost basis updates" form
https://olui2.fs.ml.com/publish/content/application/pdf/GWMOL/Cost_Basis_Update_-_Multiple_Securities.pdf

Morgan Stanley: Maybe. Call them. Using Google, did not find a reference to updating your data.

Schwab: Call them. "Want to confirm or adjust your current cost basis method? Talk with your Schwab Financial Consultant."
 https://www.schwab.com/learn/story/save-on-taxes-know-your-cost-basis#  [link checked Jun 24, 2024]

Vanguard Brokerage: Maybe -- call them. Using Google, did not find a reference to updating your data.
"How we report your cost basis information"
https://investor.vanguard.com/investor-resources-education/taxes/cost-basis-reporting 
(HPAA members indicate that Vanguard Brokerage apparently did not report the 2017 Micro Focus spinout to the IRS.)

4. If you don't have good records -- or didn't get your lot-and-cost information into your broker's system

If you don't have good records -- or didn't get your lot-and-cost information into your broker's system -- you can use our spreadsheets to develop a reasonable estimate of your cost basis for most HP/HPE-related stocks for any span of HP employment through the 11/1/2000 plan changeover. Stock Spreadsheets

Next step:  Stock Spreadsheets

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