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This topic will show you how to process the spin-off of Phillip Morris International (PM) by Altria (MO) for transactional accounts.
Payable to holders of record end of: 3/31/2008
Ex-date: 4/1/2008
Parent Company: Altria
Parent Company Symbol: MO
Average price on ex-date: $21.585
Spin-off Company: Phillip Morris International
Spin-off Company Symbol: PM
Average price on ex-date: $50.600
Share Distribution Ratio: 1 share of Phillip Morris International (PM) for every share of Altria (MO)
Cost Allocation: 70.10% cost allocated to PM, 29.90% cost allocated to MO
What To Do
In order to demonstrate how to process this spin-off, we will use the following sample transactions:
You bought 200 shares of Altria (MO) at $80.00 per share on 5/15/2006
You bought 100 shares of Altria (MO) at $90.00 per share on 7/15/2007, and
You sold 100 shares of Altria (MO) at $100.00 per share on 9/15/2007.
This leaves you with the following open lots:
100 shares at an $80.00 per share cost basis, acquisition date of 5/15/2006 and
100 shares at a $90.00 per share cost basis, acquisition date of 7/15/2007.
To resolve these open lots, on the Transactions import blotter, do the following:
Use the Debit of Security transaction type to debit 200 shares of Altria (MO) with a transaction date of 4/1/2008.
Use Credit of Security to credit 100 shares of Altria (MO) with a received date of 4/1/2008 and an original date of 5/15/2006. The per share amount is $23.92 (based on the original cost of $80.00 multiplied by the cost allocation of 0.2990).
Credit 100 shares of Altria (MO) with a received date of 4/1/2008 and an original date of 7/15/2006. The per share amount is $26.91 (based on the original cost of $90.00 multiplied by the cost allocation of 0.2990).
Credit 100 shares of Phillip Morris International (PM) with a received date of 4/1/2008 and an original date of 5/15/2006. The per share amount is $56.08 (based on the original cost of $80.00 multiplied by the cost allocation of 0.7010).
Credit 100 shares of Phillip Morris International (PM) with a received date of 4/1/2008 and an original date of 7/15/2006. The per share cost is $63.09 (based on the original cost of $90.00 multiplied by the cost allocation of 0.7010).
Note: This illustration assumes FIFO.
End Result
|
Security |
Symbol |
Shares |
Acquisition Date |
Cost Basis |
|
Altria |
MO |
100 |
5/15/2006 |
$23.92 |
|
Phillip Morris |
PM |
100 |
5/15/2006 |
$56.08 |
|
|
|
|
|
$80.00 |
|
Altria |
MO |
100 |
7/15/2007 |
$26.91 |
|
Phillip Morris |
PM |
100 |
7/15/2007 |
$63.09 |
|
|
|
|
|
$90.00 |
Note: This is only an example. Morningstar does not guarantee the accuracy or completeness of the example. This document is not intended to provide tax or legal advice about the transactions described. Users are urged to consult their tax advisors and legal counsel about the tax consequences of all transactions.