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Subject

Author

Date

Spin Off

alle

04-12-2007

Phil Marti

joetaxpayer

Andrew

joetaxpayer

MyVeryOwnSelf

bono9763@yahoo....

MyVeryOwnSelf

Posted by alle on April 12, 2007, 12:25 am

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A company in which you hold stock spins off a division that
is then listed on the exchange and you receive a number of
shares of the spun off company. I understand that this is
not a taxable event. If you now sell the shares of the new
company, what is your basis and will it be short or long
term gain considering that you held the old company for
several years?

<< ------------------------------------------------------- >>
<< 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 Phil Marti on April 12, 2007, 6:32 pm

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> A company in which you hold stock spins off a division that

> is then listed on the exchange and you receive a number of

> shares of the spun off company. I understand that this is

> not a taxable event. If you now sell the shares of the new

> company, what is your basis and will it be short or long

> term gain considering that you held the old company for

> several years?

We'll hope you're asking this question right after the
spinoff, while you can still find the paperwork, rather than
4 days before you have to file a return for the year in
which you sold the stock you acquired years ago. The time
to make these adjustments to your basis records is when the
spinoff happens.

The answer to your question lies in the spinoff paperwork.
If you can't find it, investor relations should be able to
help you.

--
Phil Marti
Clarksburg, MD

<< ======================================================= >>
<< 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 joetaxpayer on April 12, 2007, 6:32 pm

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alle wrote:

> A company in which you hold stock spins off a division that

> is then listed on the exchange and you receive a number of

> shares of the spun off company. I understand that this is

> not a taxable event. If you now sell the shares of the new

> company, what is your basis and will it be short or long

> term gain considering that you held the old company for

> several years?

In nearly all cases, you are given the shares as a
non-taxable event. The acquisition date for all shares is
kept the same as the original stock, so yes, long term. Your
basis is determined by the bean counters who do the
spin-off. There is no way to calculate the values from the
current prices and number of shares. The company must issue
a statement that will say for example;

"Based on such values, 89.5% of a Motorola shareholder's
aggregate tax basis in his or her shares of Motorola Common
Stock prior to the Distribution should be allocated to such
shareholders shares of Motorola Common Stock and 10.5%
should be allocated to such shareholder's shares of
Freescale Class B Common Stock (including any fractional
shares of Freescale Class B Common Stock)."

Of course, this was the result of MOT spinning off FSL, and
the quote is from a company press release. Each share of MOT
gave you .1104 shares of FSL, for what that's worth.

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 Andrew on April 13, 2007, 3:11 am

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joetaxpayer wrote:

> ...

> In nearly all cases, you are given the shares as a

> non-taxable event. The acquisition date for all shares is

> kept the same as the original stock, so yes, long term. Your

> basis is determined by the bean counters who do the

> spin-off. There is no way to calculate the values from the

> current prices and number of shares. The company must issue

> a statement that will say for example;

In many (most?) cases you are also given any fractional
remainder shares in cash. For example, if you hold 98.987
shares in Company x, and the ratio of the old stock to new
stock is 4 to 1, you'll end up with 24.746745 shares of the
new company, and they'll give you the 0.746745 in cash,
leaving you with a nice round 24 shares of the new company.
Just for yucks, since I've never dealt with this in a
taxable account, how is this cash typically handled,
tax-wise?

Regards -

Andrew

<< ------------------------------------------------------- >>
<< 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 joetaxpayer on April 13, 2007, 11:48 pm

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> In many (most?) cases you are also given any fractional

> remainder shares in cash. For example, if you hold 98.987

> shares in Company x, and the ratio of the old stock to new

> stock is 4 to 1, you'll end up with 24.746745 shares of the

> new company, and they'll give you the 0.746745 in cash,

> leaving you with a nice round 24 shares of the new company.

> Just for yucks, since I've never dealt with this in a

> taxable account, how is this cash typically handled,

> tax-wise?

You follow the same equation, and still calculate a 'per
share' basis. You then have a transaction (for your example
above) of 0.746745 shares sold for the cash in lieu, with a
basis of 0.746745*(single share basis). This part of the
math is pretty simple once you have the numbers from the
spinoff paperwork.

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. >>
<< ------------------------------------------------------- >>

Similar Threads	Posted
another spin	April 18, 2008, 4:28 pm

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