How do I enter the acquisition of a new stock (SFL) that was
acquired as a tax exempt dividend from another company
(FRO)?

Our holding (100 shr) in the parent company (FRO) was not
decreased by this action. But we did end up with 10 shr of
SFL.

Does this decrease our cost basis in the parent company?
Since the broker listed the cost of the spinoff as $0.00,
what do we use for the cost basis of the spinoff company?

Thanks in advance, your help will be appreciated.

The only thing that I can find on this was a transaction in 2004, where
the shares of SFL were treated as a ***taxable*** dividend.

Rip West
Saint Paul, MN

Hi Rip,

There is mention of FRO’s spinoff in March 2005 on their Q-1
results at:

http://www.frontline.bm/IR/reports.shtml

At the bottom of the first page, it says “In January 2005,
the company reduced its shareholding in Ship Finance (SFL)
by 25 percentage points through a share distribution. In
March 2005, the company distributed a further 10 percentage
points of its investment in SFL.”

But I don’t see mention of a “tax exempt dividend” which was
the term used by our club online broker when they listed it
on our monthly report.

Alan


Rip West wrote:
> The only thing that I can find on this was a transaction in 2004, where
> the shares of SFL were treated as a ***taxable*** dividend.
>
> Rip West
> Saint Paul, MN

Hi Alan,

Their website had tax descriptions of the two distributions of SFL
shares in 2004. Both of these were described as taxable dividends, not
spinoffs. I can find no tax description of the 2005 distribution, but
the one for 2004 did not come until late January of 2005. Presumably,
they will get getting this info out.

To me, it appears likely that it is not a spinoff, but a taxable
transaction, but, of course, I would do nothing until you get official
word.

The fact that the broker used the term 'tax-exempt' should mean less
than nothing <g>.

Rip West
Saint Paul, MN