Stock "spin-offs"
Jean-David Beyer
jdbeyer at exit109.com
Fri Mar 19 11:35:54 EST 2004
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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