How to account for a Stock Spin Off
Here is how I accounted for the spin off of AOL from Time Warner along with the Cash in Lieu of sale that took place in December 2009. This same method should work for any stock split.
1. Determine the original acquisition date and calculate the correct adjusted cost basis using published material from the issuer. This can be found by Google search for the transaction i.e. Time Warner AOL Spin Off.
2. Create the New Security with the correct symbol.
3. Enter the transactions to remove the original position and replace it with the two new positions reflecting the original date and the adjusted cost basis for each new position.
4. Enter the Sell for the fractional shares at the current date.
DATE ACTION SECURITY SHARES AMOUNT
Spin Off Date SellXfr Original Company Total Shares $0.00
Original Date BuyXfr Original Company New # of Shares Adjusted Basis
Original Date BuyXfr New Company Shares + Fractional Adjusted Basis
Spin Off Date Sell New Company Fractional Shares Proceeds
This should leave you with the original acquisition dates for the two securities as well as their correctly adjusted cost basis. And it should leave you with the proceeds of the fractional sale along with the correct capital gain/loss information for the fractional shares that were sold.
Thanks to user FatRaiderFan for writing this FAQ!
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