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Technology Stocks : HWP -- Hewlett Packard
HPQ 19.37-0.4%Jan 27 3:59 PM EST
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To: Kirk © who wrote (3432)6/3/2000 4:30:00 PM
From: w0z  Read Replies (1) of 4722
 
For anyone interested, I did a cost basis calculation based on page 4 of the Information Statement we all received about the Agilent spin-off. I make no guarantees about the accuracy and am really just posting this for your information and to see if I've made any errors. See your tax accountant for your specific case and refer to page 4 of the Information Statement as you review the following.

Assumptions:

*** 0.3814 shares Agilent distributed per old HWP share.
*** HWP_wi June 2 closing price = 111
*** A June 2 closing price = 81 3/4
*** Original number of HWP shares = 1.0
*** Original cost basis of 1 HWP share = $1.00

Using the formula on page 4:

(.3814 X) + 1.0 ((111/81.75) X) = $1.00 where X is the new cost per share basis in A , thus X = $0.5750 The new cost cost per share basis of HWP is X * (111/81.75) or $0.7807

To check my math, the total cost basis is $0.7807 for 1.0 share of HWP and $0.2193 ($0.575*.3814) for 0.3814 shares of Agilent issued. $0.7807 plus $0.2193 equals $1.00 which was the cost basis of the original share of HWP. BE CAREFUL NOT TO CONFUSE COST BASIS PER SHARE WITH TOTAL COST BASIS WHEN USING THESE NUMBERS!

Here's a table to summarize:


           Old HWP     New HWP      New A
#shares      1.0         1.0        0.3814
Cost/share  $1.00      $0.7807     $0.5750
Total cost  $1.00      $0.7807     $0.2193


I hope this helps...I was confused by the wording underneath the formula Y = R * X on page 4 which says "R equals the percent of the fair market value of A common stock represented by the fair market value of HWP common stock." I first interpreted that as meaning A/HWP (closing prices) but the numbers in their example indicate HWP/A and this interpretation makes my example and theirs work out correctly.

Now I've just got to program my spreadsheet to calculate this for 37 different acquisitions of HWP stock spread over many years!
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