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Another spinoff question

General questions about using Fund Manager that do not fit into any other forum.

Postby DavidJ » Tue Apr 02, 2019 8:23 am

Hi!

The DWDP spinoff of DOW.

For a while I have owned 213.9899 shares of DWDP and the Fund Manager spinoff gadget lists a cost basis for the whole position in DWDP. Today I found out that I had just been 'given' 71 shares of DOW, a spinoff. How do I figure out the cost basis of the spinoff to record in the FM spinoff gadget?

Is there anything else I have to know here?

Thanks.
David.
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Postby rjwerning » Tue Apr 02, 2019 9:28 am

Interested in this myself as I'm in the same boat. My etrade account doesn't show any details of the transaction, other than the new shares of DOW showing up and the price per share of DWDP dropping ~$18/share. I'm going to wait until the dust settles on etrade transactions and to see what response shows up here, before I do anything with my fundmanager records.
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Postby Mark » Tue Apr 02, 2019 9:50 am

Hello,

I am not sure either at this point. In doing a quick search I couldn't find details on the cost basis. You might ask your broker, or wait and see if it gets posted online. I suspect it would be posted here:

http://www.dow-dupont.com/investors/faq/default.aspx

as they have details for past mergers and spin-offs there, but not for this current DOW spin-off yet.
Thanks,
Mark
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Postby DavidJ » Thu Apr 04, 2019 2:03 am

OK, I think that I now have all the information I need to do the calculation, though nobody is going out of their way to make it easy. First of all, the general rule (from a Dow document about the spinoff at http://s21.q4cdn.com/813101928/files/do ... tement.pdf , p. 26):

your tax basis in the DowDuPont common stock held by you
immediately prior to the distribution will be allocated between your
shares of DowDuPont common stock (which now reflect ownership
of New DuPont) and the Dow common stock that you receive in the
distribution in proportion to the relative fair market values of each
immediately following the distribution.


Since we get 3 shares of Dow stock for each share of DowDuPont we originally owned, I understand this to mean that the cost basis of the DOW we get equals 1/4 of the original tax basis of the original position in DWDP whci we held. Is that correct?

(The original tax basis of the DWDP is displayed by the FM spinoff gadget when we record the spinoff.)

Thanks.
D.
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Postby Mark » Thu Apr 04, 2019 9:20 am

Hi DavidJ,

Thanks for that information, that is very helpful. That is saying the tax basis is divided up based on market value of each DOW and DWDP right after the distribution. (It is not divided up based on the share balance, so it won't be 1/4th of the original basis.) I'm not sure exactly what values they will use for market value after the distribution, but assuming they use the market value as of the close on Apr 1, 2019, it would be like this:

DWDP close as of 4/1/19: $36.60/share
DOW close as of 4/1/19: $53.50/share

So, you will own 3 shares of DWDP @ $36.60 for each 1 share of DOW @ $53.50 after the distribution. We can calculate the ratio of market value of DOW / Total_Mkt_Value as:

53.50 / (3 * 36.60 + 53.50) = 0.32762

So, assuming those share prices get used, 32.762% of your original DWDP basis would move to DOW. Please don't use this number, but wait for more official information from your broker. This is just meant to give you an idea of how it will be determined.

Interestingly, Yahoo is reporting a split in DWDP on Apr 2 with a ratio of "1000/1487 Stock Split". This is a ratio of 67.249%, so 67.249% of DWDP leaves 32.751% for DOW, which is pretty close to our calculated 32.762% number. Again, I would wait to get the exact amount of transferred basis from your broker, but it should be in this ballpark.
Thanks,
Mark
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Postby DavidJ » Sat Apr 06, 2019 5:16 pm

OK. I entered the broker's number. Their percentage turns out to be 39.105278. I don't know whether that's close enough or not, but it's what I get from the number they give.

Thanks.
D.
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Posts: 73
Joined: Mon Dec 31, 2007 8:29 am

Postby Mark » Wed Jun 12, 2019 8:31 am

Dow Dupont issued an example calculation in this document to shareholders:

https://s23.q4cdn.com/116192123/files/d ... -Final.pdf

that uses 33.5620% as the amount of cost basis to transfer from DowDuPont to Dow.
Thanks,
Mark
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