Stock "spin-offs"

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On Friday 19 March 2004 10:07, Bobby Goins wrote:
> 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.
>
IANA..CPA but:  
It is neither gift nor income.
You just have to adjust your original cost allocation, e.g.:
- Past: You bought 100 shares of GM at $100 (Cost $10000)
- Day of spinoff: You own 100 shares of GM "fair market price" of 
$200 and 50 shares of Delphi at $50. (Total fair market price of 
portfolio: $22500  89% GM, 11% Delphi)
You allocate your original cost of $10000: 89% to GM, 11% to 
Delphi (GM cost of $89, Delphi at $22)

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