Stock "spin-offs"

[Jean-David Beyer]

Bobby Goins wrote:
> The question is not necessarily how to account for it for tax
> purposes. My question is: How do I conceptually make it "appear" in
> gnucash?
> 
> I know I can create the stock account, that is not my issue.
> 
> Do I treat the spin-offs as if they "fell from the sky", or is there
> a better way to do this (almost like a stock spit)?
> 
> BTW: The quantity of GM stock was not changed, nor did I pay for the
> new stock, other than capital gains tax.
> 
> -----Original Message----- From: Derek Atkins <warlord at MIT.EDU> To:
> "Bobby Goins" <goins at iglou.com> Date: Fri, 19 Mar 2004 11:11:20 -0500
>  Subject: Re: Stock "spin-offs"
> 
> 
>> I would suggest you ask your tax advisor and/or accountant.
>> 
>> I can answer the question of how to account for it in gnucash, once
>> you know which accounting approach you're using.  But I have no
>> idea which is the proper accounting approach.
>> 
>> It probably depends on: a) did you lose any GM stock? b) did the
>> Raytheon/Delphi stock have any value when you acquired it c) did
>> you have to pay anything for the stock?
>> 
>> How you account for it probably depends on all of these answers,
>> but again, I suggest you talk to your accountant.
>> 
>> -derek
>> 
>> "Bobby Goins" <goins at iglou.com> writes:
>> 
>> 
>>> How does one handle stock "spin-offs"?
>>> 
>>> For instance, I have some General Motors stock.  General Motors
>>> "spun off" Raytheon and Delphi.  I received stock in each of
>>> these companies.
>> 
>>> I don't know how to handle the new stock.  Do I: - treat it as a
>>> gift, or - consider it as part of income (such as dividends)?
>>> 
>>> I have no problem in taking care of subsequent transactions 
>>> concerning
>> 
>>> the new stock.  My problem is how to handle the "creation" of the
>>>  stock in my portfolio.
>>> 
I believe for tax purposes that the new stock is purchased on the date 
of the spin off with funds received from the spinning-off company, which 
funds are return of capital. Thus, they are neither a gift nor a 
dividend. The price of the new stock is told you by the company doing 
the spinning off and you must get it from them. They always distribute a 
letter explaining this in my experience. (ATT spinning off the RBOCs, 
and then Lucent spinning off this and that, IBM? spinning off Lexmark?, 
GM spinning off Hughes? I forget them all.) They give cash in lieue of 
shares and do not spin off fractional shares (well, they might if you 
were in their DRIP plan; I would not know about that).

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