Here's a quick update on how Schwab treated the CRP payments. [Qualifier: I'm not a CPA; I'm a retired lawyer who is still licensed to practice before the US Tax Court. Check with your accountant before you act on this information.] Also, sorry for the long-winded explanation, but it could be very important for some taxpayers.
Our Exxon/IOC CRP payments were handled through our various Schwab accounts. Schwab correctly provided us with 1099-DIV forms which had the CRP payments listed under Box 8 as "Cash liquidation distribution", which is then entered on IRS Form 8949. Any liquidating distributions you receive are not taxable to you until you recover the basis of your stock. After the basis of your stock is reduced to zero [which for may IOC shareholders will be true on the merger of Exxon and IOC], you must then report the liquidating distribution as a capital gain. If the total liquidating distributions received are less than the basis of the stock, a capital loss is generated. Whether you report the gain or loss as a long-term or short-term capital gain or loss depends on how long you have held the stock.
However, when you request your Schwab information for your 1099's to be downloaded to most tax preparation programs, Schwab incorrectly [in my considered opinion] enters the date of acquistion of the CRP as 02/23/17 [the date of the Exxon purchase of IOC]. This converts the CRP payment automatically to a short-term capital gain, with its subsequent higher potential tax liabiliy and consequences. The rationale by Schwab is that the CRP was created on that date, so the holding period for calculation and short/long-term gain/loss also begins on that date. I believe that this is an incorrect assumption.
I believe that the holding period for the calculation of both basis and the time period for short/long-term gain/loss should begin on the date on which a shareholder purchased the underlying stock [IOC], and not the date on which the CRP was created. The rationale for this is that the right to obtain a CRP was created on the date on which you first purchased the IOC stock, not on the date on which the CRP was itself created. But for one's ownership of the underlying IOC shares, one would not have any right to own a CRP for each share of IOC stock; thus, the holding period should be based on the ownership of the the underlying IOC stock itself. Thus, the 'date acquired' boxes on IRS From 8949 should not read 02/23/2017, but rather reflect the date[s] when the shareholder actually purchased the underlying IOC shares.
In order to change this in a computerized tax preparation program, however, requires overriding the lines on both IRS Forms 8949; Sales and Other Dispositions of Capital Assets and on Schedule D; Captial Gains and Losses to shift the CRP payments from short-term to long-term capital losses/gains. However, if the over-ridden tax forms are subsequently filed with the IRS electronically, they will trigger an audit as the data in the forms will be unable to be electronically correctly verified against the Schwab informaton that was electronically added to the forms. If your tax preparer does move the CRP to be a long-term capital gain/loss, the tax forms should be filed by mail.
Hope this helps. If you've already filed your taxes, check your Forms 8949 and you can always amend your taxes with a 1040-X.
I believe that this will probably be my final post on SHU. It has been a pleasure to swap thoughts will all of you and I wish all of you the best of luck in the future.