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I recently obtained shares of Sylvamo Corp (SLVM) as a result of a spinoff from International Paper (IP). In the transaction history of the containing brokerage account there was no intermediate transaction - such as a dividend (from IP) and subsequent buy (of SLVM). It simply shows up as gaining shares of SLVM.

In my personal finance software (MoneyDance) there is no specific transaction type to accurately represent this. So I created the "dividend and buy" intermediate transactions.

Is there an alternative approach to this - should I just "add" x shares of SLVM with no connection to the spinoff, for example?

EDIT: More observations (I'm beginning to understand the accounting...)

  • The spinoff ratio IP is 11:1 ("receive 1 share of SLVM for every 11 shares of IP held")

  • The "purchase history" showing in brokerage account shows a complete history for SLVM dating back to 2018-06-13 for SLVM when I've never owned SLVM (until this spinoff). But not coincidently the IP purchase history covers the same dates.

  • Any fractional share amount (in SLVM) resulting from the spin-off calculation is truncated and the fractional shares converted to cash.

The part I'm still trying to figure out is how it's a zero-sum event if my IP share amount did not change and it's seems impossible to correlate a price drop to a spinoff.

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  • The spin-off is bought with funds that could be considered a return-of-capital accounted to the holding of the parent company. The numbers are just needed. Of course a return-of-capital function is needed.
    – S Spring
    Oct 3, 2021 at 16:13

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I am not familiar with MoneyDance so I can't help you with that. But perhaps if you understand the spin off, you can adjust the cost basis of each.

A spin-off is a zero sum event in which the total cost basis of all the shares owned after the spin-off equals your total cost basis in the shares owned before the spin-off. If there are fractional shares involved, they will be sold off and must be incorporated into the cost basis calculation - you'll receive the proceeds which will be taxable.

Determine the cost basis of the spin off shares. That's their purchase price. The cost basis of the original shares will then become what you paid for them less the cost basis of the spin off shares. If fractional shares involved, it becomes a bit more complicated. Google "Spin off tax basis" for explanations and examples.

It gets even more complicated if you purchased shares at different prices. Then, you'll have to figure out your new cost basis for each position if you eventually sell them off piece meal.

It's even worse if the parent company spins off several companies at once :->)

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  • Thanks. Interesting that using my brokerage account the "purchase history" of the spin-off SLVM goes back to 2018-06-13 even though I've never owned SLVM (until this spinoff) - which corresponds exactly to my IP purchase history (date-wise) with the share quantities roughly consistent with the 11:1 spinoff ratio.
    – Computable
    Oct 3, 2021 at 14:18

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