Ford/Visteon Spin Off
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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>.
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