Ford/Visteon Spin Off
Ford/Visteon Spin Off
This is part of a continuing series on entering Spin Offs and Mergers in
bivio and NCA.
Ford Motor Company [F] spun off Visteon [VC] as of 6/28/00. Shareholder were to receive .130933 Visteon shares for each Ford share held. The tax basis for the Ford shares after the spin off was to be 96.07% of the basis before the spin off. In NCA parlance Rem. Basis equals .9607. This percentage is computed by the companies involved, and is dependent on the prices of each company on the day of the transaction. Ford closed at $43.25 on the day of the spin off, and Visteon closed at $13.75.
We will take an actual case to illustrate how to enter this transaction, both in the bivio and NCA software programs.
Assume that we own 100 shares of Ford, with a total cost of $5,012.00.
To record the transaction in bivio.............................
Go to Accounting|Investments. Click on Ford. When the Ford screen comes up, click on the Spin Off Icon. For the ticker symbol for Visteon, enter VC. For Transaction Date, enter 6/28/2000.For the number of shares of Visteon issued, enter 13.093 [it is very important to include any fractional shares with the number of shares received of the new company.] For Remaining Basis Percentage, enter 96.07 [do not enter this as .9607 and do not enter a percent sign.] For Cash Received, enter 1.14. Enter the account that this cash went to, probably Broker. You can include a remark, and then hit OK. Your transaction has been entered and the fractional share has been sold for $1.14.
To record the transaction with NCA software.............
Go to Securities|Enter New Transaction|Spin Off. For Spin Off Company, select Visteon [If Visteon does not appear in the drop down box, select New Company, and enter all the data for Visteon. After you are through, be sure that Visteon is listed as the spin off security on the Spin Off form]. Enter the shares received, including any fractional shares. In our example, we would enter 13.093. For price per share, enter 13.75. Click on the Date box, and enter 6/28/00. For Parent Company, select Ford. In Rem. Basis Fraction, enter .9607.Hit Tab, and the price for the parent company, after the spin off, will appear. [Note - you could have left the Rem. Basis Fraction box blank, and entered the price for the parent company. This would calculate the Rem. Basis Fraction. I always advocate entering the Rem. Basis Fraction, as published by the company, since you can not always be sure which price - closing, average, etc. they are using for the calculation.] Do not enter anything for cash received. NCA has a glitch, which records the sale of a fractional share on the basis of the price that you have entered for the spin off company, rather than the actual cash received. We will enter the sale of the fractional share later. Enter a remark, if you wish, and click on OK.
Now, we must enter the sale of the fractional share in the NCA software. Go to Securities|Enter New Transaction|Sell. For security, select Visteon. For date, select 6/28/00. Select the account where the cash was received [probably Broker]. For shares, enter the fractional amount [in our example .093]. For Sales Price, enter the amount of cash that you received in lieu of fractional share [in our example 1.14. Enter a remark, if desired, and click on OK. You have now entered the transaction in the NCA software.
The result of all of this is that we have allocated a portion of our original tax basis in Ford to the shares of Visteon received. In addition, we have recorded the sale [and resultant gain or loss] for the portion of the Visteon shares received that were less than one. The holding period for the Visteon shares will be the same as the holding period for the Ford shares.
The procedures for entering a spin off are not always intuitive, but I am hoping that it is a lot easier to do the actual entering than it is to write about it <g>.