Spin-off of Flowers Foods
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Spin-off of Flowers Foods A question was raised in another forum about the
recent spin-off of Flowers Foods from Flowers Industries.
Flowers Foods was recently spun off from
Flowers Industries and a subsequent merger of Flowers Industries with a
subsidiary of Kellogg. Our investment club owned 35 shares of Flowers Industries
for which we received $12.50 per share as a cash payment with a $15.00 brokerage
fee and we received 7 shares of the new Flowers Foods
company.
This is not a typical spin off, in that it does not qualify for tax-free treatment. Gain or loss will be recognized on the difference between tax basis of the original Flowers Industries shares and the consideration received. This consideration will consist of cash of $12.50 per share plus the fair market value of the new Flowers Foods shares. From the Flowers Foods press release on
3/29/01.....
For purposes of the spin-off, Flowers Foods
believes the fair market value of the common stock of Flowers Foods is $20.52
per share, determined by averaging the high and low reported trading prices of
Flowers Foods common stock on the first day of regular trading on the
NYSE.
Using the above facts, the total consideration would be
computed as follows:
In either bivio or NCA, you should record a sale
of the 35 shares of Flowers Industries for a total amount of $581.14.
After recording the above sale, you should enter a
purchase of 7 shares of Flowers Foods [FLO] for a total amount of
$143.64.
As for the brokerage fee of $15, it is not clear
to me if this is a commission on the purchase of the new shares, commission on
the sale of the old, or just a general fee. In the absence of any further
information, I would record this as a commission against the sale.
The holding period of the new stock will start with
the date of this transaction, presumably 3/28/01.
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