EMC/McData Spin-Off
This is part of a continuing series on entering Spin-Offs and Mergers in bivio and NCA.
EMC Corporation [EMC] spun off McData Corporation [MCDT] as of February 7, 2001. EMC shareholders were to receive .0368069 shares of McData for each  share of EMC owned. The tax basis for the EMC shares after the spin off was to be 97.81% of the basis before the spin off. In NCA parlance, Rem. Basis equals .9781. This percentage is computed by the companies involved based on certain average prices before the spin off date. EMC closed at $59.50 on the day of the spin off, and McData closed at $39.25. You can find the company explanation of the transaction at
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 EMC, with a total cost of $11,600 

To record the transaction in bivio.............................

Go to Accounting>Investments. Click on EMC. When the EMC screen comes up, click on the Spin Off Icon. For the ticker symbol for McData , enter MCDT. For Transaction Date, enter 2/7/2001. For the number of shares of McData issued, enter 3.68069 [it is very important to include any fractional shares with the number of shares received of the new company.] For Remaining Basis Percentage, enter 97.81 [do not enter this as .9781 and do not enter a percent sign.] Enter the amount of cash received in lieu of the fractional shares. 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 the amount that you indicated.
To record the transaction with NCA software.............

Go to Securities>Enter New Transaction>Spin Off. For Spin Off Company, select McData [If McData does not appear in the drop down box, select New Company, and enter all the data for McData . After you are through, be sure that McData 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 3.68069. For price per share, enter 39.25. Click on the Date box, and enter 2/7/01. For Parent Company, select EMC. In Rem. Basis Fraction, enter .9781.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 McData . For date, select  2/7/01. Select the account where the cash was received [probably Broker]. For shares, enter the fractional amount [in our example .68069]. For Sales Price, enter the amount of cash that you received in lieu of fractional share. 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 EMC to the shares of McData received. In our example, we have allocated 97.81% of the original cost basis of $11,600.00 to EMC after the spin-off. In addition, we have recorded the sale [and resultant gain or loss] for the portion of the McData shares received that were less than one. The holding period for the McData shares will be the same as the holding period for the EMC shares.
Rip West
Saint Paul, MN