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Spin-off cost basis: can someone help please?
I hope someone can follow me on this. It's not trivial.
On Feb 25th '13 LUK spun-off CWGL, distributing 1 share of CWGL for every 10 shares of LUK.
At the day of the spin-off the fair market value for LUK was 26.76 and for CWGL was 7.88
Therefore, the basis for tax purposes is: B = ( 26.76 + 0.1 x 7.88 )
The percent of B allocated to 1 share of LUK is 26.76 / B = 97.14%
The percent of B allocated to 0.1 share of CWGL is 0.788 / B = 2.86%
All right for now? Ok...
Now, I bought 100 LUK long ago at 25 per share.
My (tax) cost bases for each 1 LUK is 25 x 97.14% = 24.285
My (tax) cost bases for each 0.1 CWGL is 25 x 2.86% = 0.715
Therefore, my cost bases for each whole CWGL share is 0.715 x 10 = 7.15
Doesn't sound right? It did to me, until I read this document, from LUK
http://www.costbasistools.com/taxstmts/Crimson.pdf
which on page 3, item 15, states that 2.86% is for one whole share of CWGL, not for 0.1 !
I'm very confused and I'd be very glad if someone can help. Thanks in advance!
Both answers I received were fundamentally wrong. I do understand that:
- most probably the question was too articulated and perhaps I did not make it clear
- the responders gave a quick look at question and certainly did not care about the link
But I got my answer in a different way. I must (and will) calculate the correct basis.
2 Answers
- troLv 77 years ago
your LUK stock was and always will be $25/sh, what you paid for it
if the spin off, CWGL was $7.88/sh at the spin off that is your price per share(that was sort of a dividend for owning the stock which got split off into another entity)
- JudyLv 77 years ago
No, your cost basis for the total shares of CWGL is still what you originally paid for the LUK stock it replaced. It has nothing to do wil the price of either stock at te time of the spinoff.
