On 02/21/18 10:41, Les wrote:
Thanks Tommy for your input.
There was not any information on either the spun-out company or the
company that did the spin-out. (both companies are Canadian stocks.)
I have sent email to both companies to determine my basis.
On 02/21/2018 11:59 AM, Tommy Trussell wrote:
On Tue, Feb 20, 2018 at 10:02 PM, nvsoar <nvs...@charter.net> wrote:
Comment: It seems to me that a zero cost for the spun off shares is
incorrect if a non-zero basis exists for the pre-spin off shares. A
zero
cost for the new shares will result in a higher than necessary
capital gain
when those shares are sold. The easiest way to determine the new
basis for
each of the remaining entities that I have found is to use the cost
basis
calculator at the link previously provided.
nvsoar
Usually here in the US, when a company announces a stock spin-off, the
existing shareholders are provided a passel of materials, some of which
include a determination by a tax attorney or the IRS describing how to
calculate the basis of the spun-off shares. You can usually find the
information at the spun-off company's web site (look for a link for
"investor information") or as a document available from the company's
stock
transfer agent.
I can imagine that sometimes such information may not be finalized at
the
time of spin-off, especially if the IRS objects to some part of it,
but my
impression is that these things are almost always pretty much settled
before the time they occur because there's lots of money involved. And
nobody wants any uncertainty when there's lots of money involved...
For info - Here is an article that may be useful in understanding the
rationale of determining the post spin off basis for both remaining
entities. The basic idea is that the sum of the post-spinoff market
value of both entities is the same as the pre-spinoff market value; and
thus the pre-spin off basis is divided according to the post spin off
market values.
http://www.spinoffprofiles.com/spinoff-tax-basis-and-tax-treatment
FWIW - I agree with Mr Trussel that in many cases the firm that
initiates the spin off typically provides the percentages to determine
the new basis for each of the spun off entities. When this is not the
case then the cost basis.com tool or a manual calculation is called
for. As far as I know, the IRS has not specified which of the stock
price figures (open, close, high, low, average for the day) to be used
for determining market value.
http://www.spinoffprofiles.com/spinoff-tax-basis-and-tax-treatment
nvsoar
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