Stock "spin-offs"

[Derek Atkins]

Jean-David Beyer <jdbeyer at exit109.com> writes:

> 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.

A return on capital is called "equity" ;)

> 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.

Well, your other option is to reduce the "dollar-value" of your
stock holding by the value of the spin-off without selling any
shares, and use that value to "buy" the shares of the spinoff.

But gnucash really doesn't handle that well; you're probably better
off just using an equity account.

-derek

-- 
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       warlord at MIT.EDU                        PGP key available