Re: Spin-off Question

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Posted by Mark on June 13, 2007 at 11:06:00:

In Reply to: Spin-off Question posted by David on June 13, 2007 at 07:29:31:

: I am running FM 7.7, and I've never used the spin-off function before.

: Today I got a spin-off of 8 shares of CDL, spun off from DIS. Everything seems pretty clear except the number I'm supposed to enter as the cost basis. How do figure this? FM tells me (correctly) that the CDL was spun off from 113 shares of DIS, which had a cost basis of something like $3999 before the spin-off.

: What I actually did was what I used to do on FM5, which didn't have a spin-off function. I used the previous day's closing price, in this case, $8.27/share, and multiplied it by the 8 shares to get the cost basis. Does this make sense?

: Thanks.
: David.

Hi David,

The cost basis depends on the details of the spin-off. Usually your broker can give you this information. I did a quick Google search on this spin-off, and it wasn't clear to me either how to calculate cost basis for this spin-off. I would suggest asking your broker or tax advisor what cost basis to use for your new CDL shares.

Whatever cost basis you use for CDL, the same amount will be reduced from your cost basis in DIS by means of a Return of Capital distribution. You're really just shifting around your cost basis here. The question is, how much stays with DIS, and how much should be applied to CDL.

Sorry I don't have a more specific answer...

Thanks,
Mark
--
Fund Manager - Portfolio Management Software

Replies:

• Re: Spin-off Question jeyadev 17:58:23 07/13/07 (0)