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Cost basis for shares which spun off of Hewlett Packard (HPW->HPQ->A->VRGY)

  
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Subject Author Date
Cost basis for shares which spun off of Hewlett Packard (HPW->HPQ->A->VRGY) Susan Grossman 02-13-2007
Posted by William Brenner on February 13, 2007, 10:48 pm
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 William Brenner wrote:
> Susan Grossman wrote:

>> How do I figure out the COST BASIS of Verigy stock?
>> I'm pulling my hair out in frustration.
>>
>> Long ago I bought HWP (Hewlett Packard) and long ago sold it
>> (as HPQ). Meanwhile, HWP dividended off A (Agilent) which in
>> itself dividended off VRGY (Verigy).
>>
>> In 2006 I finally sold both the A and VRGY shares,
>> completing the sale.
>>
>> My problem is that I have no idea what my COST BASIS is for
>> the A and VRGY shares are (I sold the HPQ at a loss a few
>> years ago).
>>
>> Can you tell me HOW I am supposed to get my cost basis for
>> tax purposes on the A and VRGY shares?

> Assuming that the first quoted price for each spun off stock
> is your basis, here is how to find them:
>
> Go to Yahoo Finance http://finance.yahoo.com/ Enter the
> stocks' symbols > For each stock, click on Historical Prices
> in the left column > Adjust the End Date to the day
> following the Start Date > Click Get Prices and scroll down.
>
> Using this method, I got $14.38 for Verigy on 6/14/06 and
> $38.05 for Aligent on 11/19/99.
>
> Please note that I do not guarantee that this method is the
> correct one. Perhaps the pros will comment. (I am certain
> that they will should I be wrong.)
>
> And PLEASE, PLEASE STOP PULLING YOUR HAIR OUT.

Please ignore the above post. It is superseded by my other
one on this subject.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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Posted by joetaxpayer on February 13, 2007, 10:48 pm
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 William Brenner wrote:

> Assuming that the first quoted price for each spun off stock
> is your basis, here is how to find them:
>
> Go to Yahoo Finance http://finance.yahoo.com/ Enter the
> stocks' symbols > For each stock, click on Historical Prices
> in the left column > Adjust the End Date to the day
> following the Start Date > Click Get Prices and scroll down.
>
> Using this method, I got $14.38 for Verigy on 6/14/06 and
> $38.05 for Aligent on 11/19/99.
>
> Please note that I do not guarantee that this method is the
> correct one. Perhaps the pros will comment. (I am certain
> that they will should I be wrong.)
>
> And PLEASE, PLEASE STOP PULLING YOUR HAIR OUT.

Bill, no offense, but this is exactly the wrong way to do
it. While the relative prices may factor into the ratio
finally determined, it's not math that one can just do at
home. Every spinoff has a statement from the company which
will spell out the basis ratios. I posted both of those
links, and the OP posted links as well. A stock trading at
$50 can spin out a stock at $25, but the ratio may not be
the expected 50%. It depends on the number of shares spun to
the shareholders, shares that were sold at IPO of the
spinoff, and assignment of debt or cash reserves. Had the OP
posted her shares and info in her original email, I'm sure
many (including me) would have run the numbers. In the end,
it's straight math (using the published numbers), not very
complicated.

JOE

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by William Brenner on February 14, 2007, 9:42 pm
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joetaxpayer wrote:

> Bill, no offense, but this is exactly the wrong way to do
> it. While the relative prices may factor into the ratio
> finally determined, it's not math that one can just do at
> home. Every spinoff has a statement from the company which
> will spell out the basis ratios. I posted both of those
> links, and the OP posted links as well. A stock trading at
> $50 can spin out a stock at $25, but the ratio may not be
> the expected 50%. It depends on the number of shares spun to
> the shareholders, shares that were sold at IPO of the
> spinoff, and assignment of debt or cash reserves. Had the OP
> posted her shares and info in her original email, I'm sure
> many (including me) would have run the numbers. In the end,
> it's straight math (using the published numbers), not very
> complicated.

You are of course correct, while my post was not. After
composing it, I realized my error and found the correct
method via Google.

There was a problem with the communications between here and
MTM HQ and the first message would not SEND. Later, when I
sent the second post, the first one somehow went along with
it.

My apologies to all.

Bill

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Ernie Klein on February 13, 2007, 5:22 pm
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> How do I figure out the COST BASIS of Verigy stock?
> I'm pulling my hair out in frustration.
>
> Long ago I bought HWP (Hewlett Packard) and long ago sold it
> (as HPQ). Meanwhile, HWP dividended off A (Agilent) which in
> itself dividended off VRGY (Verigy).

I assume you mean that your HPW stock spun off 'A' before
you sold it, otherwise you would not have had any parent
stock to spin off from.

In which case you should have figured the cost basis of the
new 'A' stock _at that time_ and REDUCED the cost basis of
the parent HPW stock to reflect that reduction in value. At
the time of the spin off the total value of both stocks and
your total basis in both stocks would have been the same as
before the spinoff.

If you _didn't_ do that, and I assume that you did not,
because you are asking the question now, then what did you
use for the cost basis of the HPW stock when you sold it?
If you didn't reduce it and you used your original basis,
then your current basis for any spinoffs from that stock is
zero (you already used your total basis even though you
should not have).

> My problem is that I have no idea what my COST BASIS is for
> the A and VRGY shares are (I sold the HPQ at a loss a few
> years ago).

Because you sold the parent stock at a loss and I assume
that you used it's original basis, then you took a larger
loss than you were entitled to, resulting in lower taxes for
you at the time. If this was within the last three years
you may still be able to amend that return to correct the
error -- you might come out ahead overall. If this were
years ago, I think I would just let sleeping dogs lay, and
eat any additional tax this would cost now.

> Can you tell me HOW I am supposed to get my cost basis for
> tax purposes on the A and VRGY shares?

Most companies after a spinoff, send work sheets to compute
the new cost basis for the existing shares and the new
shares along with the new stock notice. Most companies also
have the worksheets posted on their investor section of
their web sites.

If my above assumptions are incorrect, then please provide
more information.

--
-Ernie-

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by William Brenner on February 13, 2007, 5:22 pm
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Susan Grossman wrote:

> How do I figure out the COST BASIS of Verigy stock?
> I'm pulling my hair out in frustration.
>
> Long ago I bought HWP (Hewlett Packard) and long ago sold it
> (as HPQ). Meanwhile, HWP dividended off A (Agilent) which in
> itself dividended off VRGY (Verigy).
>
> In 2006 I finally sold both the A and VRGY shares,
> completing the sale.
>
> My problem is that I have no idea what my COST BASIS is for
> the A and VRGY shares are (I sold the HPQ at a loss a few
> years ago).
>
> Can you tell me HOW I am supposed to get my cost basis for
> tax purposes on the A and VRGY shares?

I believe that you will find the answers here:
http://investor.verigy.com/distributionInfo.cfm

And here:
http://media.corporate-ir.net/media_files/irol/71/71087/faq
/agilent/taxinfo.pdf

And PLEASE, PLEASE stop pulling your hair out.

Bill

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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