Are stock spinoffs taxable?
The taxable status of a spinoff is governed by Internal Revenue Code (IRC) Section 355. The majority of spinoffs are tax-free, meeting the Section 355 requirements for tax exemption because the parent company and its shareholders do not recognize taxable capital gains.
How do you record a spin-off stock?
Recording A Corporate Spin-Off¶ Select the stock in your portfolio that is performing the corporate action. Then use the menu, Portfolio -> Record Corporate Action…. In the Enter Corporate Action Details window, enter the percentage change in cost basis in the “Cost Basis Change (%)” field.
What is a 355 distribution?
Section 355 of the Internal Revenue Code (IRC § 355) allows a corporation to make a tax-free distribution to its shareholders of stock and securities in one or more controlled subsidiaries. The split-off resembles a redemption because the shareholders have relinquished stock of the distributing corporation.
How long does a spin-off take?
THE SPIN-OFF PROCESS Generally, a traditional spin-off takes approximately six months from the initial planning stages to completion.
What is the cost basis of a stock spin-off?
Cost basis is the total amount that you paid for an investment, such as a stock. A spin-off occurs when a company divides itself into two or more pieces. If you own stock in a company that has a spin-off, the cost basis you have in the original company is divided amongst the resulting divisions.
What happens to stock options in a spin-off?
If you own options on a stock that executes a spinoff, the number of shares of the original stock in the contract will remain the same. In addition to the original shares, the new shares paid out by the issuing company will be added to your contract.
What is the difference between spin-off and split-off?
A spin-off distributes shares of the new subsidiary to existing shareholders. A split-off offers shares in the new subsidiary to shareholders but they have to choose between the subsidiary and the parent company.
Does section 355 apply to S corporations?
This rule therefore acknowledges that an S corporation can generally participate in a tax-free reorganization under Section 368, acquire the assets or stock of another C or S corporation, including a consolidated group of corporations, engage in a tax-free split-up, split-off or spin-off under Section 355, or engage in …
