Stock "spin-offs"

[Jean-David Beyer]

Derek Atkins wrote:
> In that case I'd treat it like it came from the sky.  But that's
> just me.  I'd still figure out what you need for tax purposes
> because that would answer whether to call it equity or income.
> 
It is neither; it is a return of capital originally invested in the 
company doing the spin-off; the returned capital being used to buy the 
shares of the spun-off company.

You need to handle it that way to get the record date and purchase price 
of the spun-off company so you can figure the capital gains when you 
sell the stock in the spun-off company, and know if it is short-term, 
long-term, or very-long-term capital gains. You also need it to compute 
the cost basis of the company doing the spin-off.

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