GE Reverse Stock Split: Cash in Lieu, Basis, and Spin-offs

The tax treatment of GE’s 1-for-8 reverse stock split is straightforward at its core: the exchange of eight old shares for one new share on August 2, 2021 was not a taxable event, and your total cost basis carried forward unchanged.¹² What you do owe tax on is the small cash payment you received in place of any fractional share, and what you need to get right on every future sale is the per-share basis, which has been reshuffled by the split and by the two spin-offs that followed.

The Split Itself Was Not Taxable

Federal tax law treats an exchange of common stock for common stock in the same corporation as a nontaxable swap.¹ The IRS applies that treatment to stock splits, including reverse splits: no income is recognized until you sell.²

Two things carry forward. Your total cost basis stays exactly what it was; only the per-share figure changes, because the same total is now spread over fewer shares. Your holding period also carries over, so shares you had held long enough for long-term capital gain treatment before the split are still long-term afterward.

A simple example. If you bought 80 shares of GE at $15 each, your total basis was $1,200. After the 1-for-8 reverse split you held 10 shares, and your basis per share became $120 ($1,200 ÷ 10). Nothing to report until you sell.

Cash in Lieu of Fractional Shares Was Taxable

Eight does not divide evenly into every share count, so many holders were entitled to a fraction of a new share. GE did not issue fractional shares. It paid cash instead, calculated at the post-split market price.³

The IRS treats that cash as though you received the fractional share and immediately sold it back, producing a capital gain or loss.⁴ Whether the result is long-term or short-term depends on how long you had held the original GE shares before the split. Your broker should have issued a Form 1099-B reporting the proceeds.⁵ Report the sale on Form 8949 and carry the result to Schedule D. The dollar amounts were usually small, but the reporting is expected either way.

Say you held 100 shares before the split. The math gave you 12.5 new shares. Twelve whole shares landed in your account, and you received cash for the half-share. At a post-split price near $102, that came to roughly $51 of proceeds, and the basis assigned to that half-share came out of your original per-share basis.

Basis Was Reshuffled Again by Two Spin-offs

The reverse split was step one in a larger breakup. Over the next three years GE separated into three independent companies, and each separation was a tax-free distribution that required you to split your existing GE basis across the resulting shares. If you have held GE the whole way through without tracking these adjustments, your basis figures for any sale are almost certainly wrong.

GE HealthCare, January 2023

On January 3, 2023, GE distributed one share of GE HealthCare Technologies (GEHC) for every three shares of GE common stock held on the December 16, 2022 record date.⁶ No tax was due when the GEHC shares appeared in your account, but your pre-distribution GE basis had to be divided between the GE shares you kept and the new GEHC shares.

GE’s Form 8937 provided an illustrative allocation using opening prices on January 4, 2023 ($68.41 for GE and $54.13 for GEHC): approximately 20.87% of pre-distribution basis shifted to GEHC, and 79.13% stayed with GE.⁷ GE noted that other reasonable methods of determining fair market value are permissible, so a different approach chosen with a tax advisor may yield different percentages.

GE Vernova, April 2024

On April 2, 2024, GE distributed one share of GE Vernova (GEV) for every four shares of GE common stock held on the March 19, 2024 record date.⁸ The remaining GE entity became GE Aerospace at that point.⁹ The distribution was again tax-free at receipt.

GE Aerospace’s Form 8937 used April 2, 2024 opening prices ($140.53 for GE and $142.85 for GEV) to suggest allocating 20.26% of pre-distribution basis to GEV shares and keeping 79.74% with GE Aerospace.¹⁰

How the Three Events Stack Up

Take the same starting position: 80 shares of GE bought at $15 each, total basis $1,200. After the 1-for-8 reverse split, you held 10 shares at $120 basis each.

After the GEHC spin-off, 79.13% of the $1,200 total ($949.56) stayed with your 10 GE shares, giving each a per-share basis of about $94.96. The other 20.87% ($250.44) became the basis in the 3.33 GEHC shares you received (10 ÷ 3). Fractional GEHC shares were cashed out, producing a small taxable sale on the same principle as the reverse split cash-in-lieu.
After the GEV spin-off, 79.74% of your then-current GE basis ($757.16) stayed with your GE Aerospace shares, and 20.26% ($192.40) became the basis in the 2.5 GEV shares you received (10 ÷ 4).

Each layer sits on top of the previous one. When you sell any of these positions, the basis you report has to trace back through every step. For covered securities held in a brokerage account, the broker likely made these adjustments automatically, but it is worth checking your numbers against the Form 8937 percentages before you file.

Options Positions Around the Split

If you held GE options across the split, the Options Clearing Corporation adjusted the contracts rather than the position count. Adjusted contracts traded under a modified symbol (GE1), each with a deliverable of 12 new GE shares plus a fixed cash-in-lieu amount for 0.5 fractional shares; the multiplier stayed at 100 and strike prices did not change.¹¹ For tax purposes, exercise or assignment on an adjusted contract settled with both a share component through normal clearing and the fixed cash component, and any gain or loss followed ordinary options rules on close-out or expiration.

Reorganization Fees on Your Brokerage Statement

Some brokerages charged a mandatory reorganization fee to process the split. Fees varied by firm; Fidelity did not charge one, while other major brokerages assessed fees in the range of $38. If you held GE in more than one account you may have been charged more than once. Your August 2021 statement will show whether a fee was applied. These charges are a matter of record-keeping and account reconciliation rather than a federal tax item on their own, but if you deduct investment expenses in any context they belong in your records.

1
Office of the Law Revision Counsel. 26 USC 1036 – Stock for Stock of Same Corporation
2
Internal Revenue Service. Stocks, Options, and Splits
3
U.S. Securities and Exchange Commission. GE Announces Effective Date for Reverse Stock Split
4
eCFR. 26 CFR 13.10 – Distribution of Money in Lieu of Fractional Shares
5
Internal Revenue Service. About Form 1099-B, Proceeds from Broker and Barter Exchange Transactions
6
General Electric. GE Board of Directors Approves Separation of GE HealthCare
7
General Electric. Attachment to Form 8937 – Report of Organizational Actions Affecting Basis of Securities
8
GE Vernova. Frequently Asked Questions – GE Vernova Spin-Off
9
General Electric. GE Board of Directors Approves Spin-Off of GE Vernova
10
GE Aerospace. Attachment to Form 8937 – Report of Organizational Actions Affecting Basis of Securities
11
MIAX Exchange. General Electric Company – Reverse Split Information Memo 48921