Stock splits and spinoffs are usually straightforward transactions. A variation of a stock spinoff is the split-off. In most spinoffs the number of shares owned of the parent company doesn’t change. In a split-off, a shareholder exchanges some holdings in the parent company for shares of the new company. Split-offs tend to be nontaxable transactions. In the current configuration at myICLUB.com, the best way to enter a split-off is a two-step process.
The first step is to enter a spinoff of the new company from the parent. This transfers the cost basis of the exchanged shares. The next step is to enter a reverse stock split of the parent company to account for the reduced number of shares.
Split-offs generally give the shareholders of the parent company a choice to participate and to what degree to participate. This makes the calculation of the remaining basis percent used for the spinoff step specific to the shareholder participating.
Also, the ratio for the reverse split will vary with each shareholder. So each shareholder would need to do some calculations for his specific situation.
These variations of simple transactions take a bit more work for a treasurer. But armed with a bit of knowledge, they’re fairly easy to enter.