Post by
Heywood_Silvers on Jan 19, 2022 9:52pm
Form 8937
Someone at SVBL posted this form at their website. It details the company's position on the Arras share distribution for tax purposes. SVBL indicates that the Arras shares at the distribution date were worth 39 cents a share. Out of that 39 cents, supposedly 32 cents will be taken out of E & P (earnings and profits) and the remaining 7 cents will be deducted from the basis of SVBL shares as a non-taxable return of capital to the shareholder.
This sounds all fine and dandy, however, it is completely incorrect. I checked SVBL's most recent SEC 10-K filing for their fiscal year completed 10/31/21 and per the Balance Sheet they have an accumulated deficit (Retained Earnings account) of $134 million. They are so far away from having any positive E & P it is laughable!
Proper tax accounting would dictate that 100% of the 39 cents is a return of basis. Your basis in the Arras shares should theoretically be 39 cents and you deduct 39 cents from your basis in your SVBL shares.
Meanwhile, back in reality, most of us are going to just roll with how our brokerage accounts report the transaction. If your brokerage reports the distribution as a dividend you will report it accordingly on your 1040. If not, you won't. If your brokerage gives you 39 cents or whatever the closing market price is the day the Arras shares start trading, the broker may or may not adjust your original basis in the SVBL shares.
I think most brokerage websites will allow you to manually adjust the basis in the respective shares if you so choose. For most of us, the amounts are so insignificant to the point where it really doesn't matter and we'll just roll with how the broker reports everything.
Long story short, I found it astounding how little the company knows about basic tax law, but with this group of jokers nothing surprises me anymore. Still waiting to see if the Arras shares will develop a trading market at some point in 2021.....