AT&T’s Warner Spin-Off Cost Basis: Allocation and Form 8949

If you owned AT&T stock when the Warner Bros. Discovery spin-off closed in April 2022, the AT&T Warner spin-off cost basis allocation is 76.52% to your remaining AT&T shares and 23.48% to the WBD shares you received.¹ The distribution itself was tax-free, but you still have to split your original basis between the two stocks, because whenever you sell either one, that split determines your gain or loss. Many brokers reported the WBD basis as $0.00 or “unknown,” so the math often lands on you.

The Two Percentages Every Shareholder Uses

Every AT&T shareholder applies the same allocation: 76.52% of your original AT&T cost basis stays with AT&T, and 23.48% moves to the WBD shares you received.¹ The percentages don’t change based on when you bought AT&T or how many shares you owned. They’re not optional either — the IRS expects every shareholder to use them.

The distribution closed on April 8, 2022. The percentages themselves are pinned to the average trading prices on April 11, 2022, the first day both stocks traded independently: $19.26 for AT&T and $24.43 for WBD.¹ For each share of AT&T held, shareholders received 0.241917 shares of WBD common stock.²

Working a Single Purchase Through the Split

Start with what you actually paid for one specific AT&T purchase, which the IRS calls a “tax lot.” Say you bought 500 shares at $30. Your total basis for that lot is $15,000. Then apply the two percentages:

AT&T basis: $15,000 × 76.52% = $11,478. Divided across 500 shares, your new AT&T per-share basis is $22.96.
WBD basis: $15,000 × 23.48% = $3,522. You received 500 × 0.241917 = 120.9585 WBD shares. Divide $3,522 by 120.9585 for a WBD per-share basis of roughly $29.12.

The two new bases must add back to your original total. Here, $11,478 plus $3,522 equals $15,000. If your numbers don’t reconcile, there’s an arithmetic error somewhere.

When you eventually sell either stock, these recalculated per-share figures are what you use — not the $30 you originally paid for AT&T. Shareholders who bought AT&T years ago and have that old price memorized often trip on this. The old basis no longer exists as a single number; it’s been split into two.

The IRS lets you round cents to whole dollars on Form 8949, but if you round, you must round every amount on the form, not just some. Drop amounts under 50 cents and round up anything over 49 cents.³ For intermediate calculations like per-share basis, keep at least two decimal places so small errors don’t compound across hundreds of shares.

If your brokerage adjusted the basis on its own, cross-check its figure against 76.52%/23.48% applied to your original purchase price. Some brokers handled it correctly. Others didn’t. A WBD basis listed as $0.00 means no adjustment was ever made.

Multiple Lots and Dividend Reinvestment

If you bought AT&T on different dates or at different prices, you run the allocation separately for each purchase. The percentages don’t change, but the starting basis does.

Dividend reinvestment plans are where this gets tedious. Every quarterly reinvestment created its own tax lot with its own purchase date and price. A shareholder who held AT&T for a decade through a DRIP can easily have 40 or more separate lots, and each one needs its own calculation. There’s no shortcut, because each lot may have a different holding period that affects whether a future gain is long-term or short-term.

If you can’t find purchase records for old DRIP lots, contact your broker or the transfer agent — Computershare handled many AT&T accounts. Brokers are required to maintain records for covered securities, generally shares acquired after 2011.⁴ For shares bought before 2012, the broker may still have records but isn’t required to report basis to the IRS, so the burden falls entirely on you.

Cash Received for a Fractional WBD Share

No fractional WBD shares were issued. Because the exchange ratio was 0.241917, almost every shareholder ended up with a partial share, which the broker sold and paid out as cash.⁵ That cash was immediately taxable in 2022, even though the whole WBD shares weren’t.

The IRS treats the payment as if you received the full fractional share and sold it the same day. Your gain or loss equals the cash received minus the allocated basis of the fraction. Using the earlier example with a WBD per-share basis of $29.12 and a fractional share of 0.9585, the allocated basis of the fraction is $29.12 × 0.9585 = $27.91. Your gain or loss is whatever cash appeared on your 2022 Form 1099-B minus that $27.91.

Amounts were usually small. If proceeds were under $20, the broker was not required to issue a 1099-B for the payment.⁴ You still have to report the gain or loss regardless of whether a 1099-B was issued.

Your Holding Period Carries Over

WBD shares inherit the holding period of the AT&T shares that produced them, a rule tax law calls “tacking.” When you receive stock in a tax-free spin-off, the clock doesn’t restart on the distribution date; it keeps running from the date you first bought the AT&T shares.⁶

This drives your tax rate. Buy AT&T in 2020, sell WBD in 2024, and the holding period stretches back to 2020, so any gain qualifies for long-term capital gains rates. If you had bought AT&T less than a year before the April 2022 spin-off, the WBD shares would carry that short holding period and any gain would be taxed as ordinary income. The same tacking rule applies to the fractional-share cash-out.

Reporting the Sale on Form 8949

When you sell AT&T or WBD, the transaction goes on Form 8949, which feeds Schedule D.³ How you complete the form depends on what your broker reported.

If your 1099-B shows a basis (even $0.00) and indicates that basis was reported to the IRS, use Part II, Box D for long-term sales. Enter the broker’s incorrect basis in column (e), then enter adjustment code “B” in column (f) and the dollar correction in column (g). The correction column tells the IRS exactly what you changed and why.³

If the 1099-B shows no basis or says basis wasn’t reported to the IRS, use Part II, Box E for long-term sales (or Part I, Box B for short-term). Enter the correct basis directly in column (e) and put $0 in column (g).⁷

Either way, skipping the correction means the IRS sees $0 as your basis, which turns your entire sale proceeds into a taxable gain. On a sizable WBD position, that can cost thousands in tax you don’t owe.

Fixing a Prior Return Where You Used the Wrong Basis

If you sold WBD in 2022, 2023, or 2024 without correcting the cost basis, you probably overpaid. File Form 1040-X for each affected year with a corrected Schedule D and Form 8949 attached.⁸

The deadline is three years from the date you filed the original return, or two years from when you paid the tax, whichever is later. For a 2022 return filed in April 2023, that three-year window closes around April 2026. If you sold WBD in 2022 with the wrong basis, that amended return should move to the front of the pile before the window shuts. For 2023 and 2024 sales, you have more room, but there’s no reason to wait.

If You Inherited or Were Gifted AT&T Shares

AT&T was a generational holding for many families, so it’s common to have received shares through inheritance or as a gift before 2022. The 76.52%/23.48% split still applies. What changes is the starting basis you feed into it.

For inherited shares, your basis is generally the fair market value of the AT&T stock on the date the original owner died, sometimes called a “step-up in basis.” If someone passed away in 2019 when AT&T traded at $37, your starting basis is $37 per share, and the split applies to that.⁹

For gifted shares, your basis is generally the same as the giver’s basis — whatever they paid for the stock. A gift doesn’t trigger a step-up. If your parent bought AT&T at $15 in 1998 and gave it to you in 2015, your starting basis is still $15 per share.

If you don’t know the decedent’s date of death or the donor’s original purchase price, check probate records, old brokerage statements, or the transfer agent before running the spin-off allocation.

Wash Sale Caution

If you sold AT&T or WBD at a loss and bought back shares of the same company (or a substantially identical security) within 30 days before or after the sale, the wash sale rule disallows the loss. The disallowed amount gets added to the basis of the replacement shares.

Spin-offs add a wrinkle. The IRS has indicated that stock of predecessor and successor corporations in a reorganization can be considered substantially identical. Whether AT&T and WBD fit that description for wash sale purposes is a gray area the IRS hasn’t ruled on directly. If you sold one at a loss and bought the other inside the 30-day window around the distribution, talk to a tax professional before assuming the loss is deductible.

Documents to Keep on File

AT&T’s investor relations site hosts a cost basis worksheet with the official percentages and the April 11, 2022 trading prices.¹ Warner Bros. Discovery filed a Form 8937 attachment detailing the exchange ratio and the non-taxable treatment of the distribution.² Keep both. If the IRS questions your basis, or a broker insists their $0 figure is right, these are what back up your numbers, together with Section 358 of the Internal Revenue Code, which requires shareholders to allocate basis between retained and distributed stock based on relative fair market values.¹⁰

1
AT&T. AT&T Inc. / WBD
2
Warner Bros. Discovery, Inc. Attachment to Form 8937
3
Internal Revenue Service. Instructions for Form 8949
4
Internal Revenue Service. Instructions for Form 1099-B (2026)
5
Warner Bros. Discovery. WBD FAQs Updated 4-18-23
6
Office of the Law Revision Counsel. 26 U.S. Code 1223 – Holding Period of Property
7
Internal Revenue Service. Instructions for Form 8949
8
Internal Revenue Service. Instructions for Form 1040-X
9
Internal Revenue Service. Publication 551 (12/2025), Basis of Assets
10
Office of the Law Revision Counsel. 26 U.S. Code 358 – Basis to Distributees