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Gold/Mining/Energy : Freeport McMoran (FCX) -- Ignore unavailable to you. Want to Upgrade?

To: Lynn who wrote (7)	4/16/1998 8:39:00 PM
From: Potato Farmer	Respond to of 141

Capital Gains Treatment of spinoffs. I'm not an enrolled agent so treat my advice with caution. ("Free advice is worth the price.") Tax free spinoffs are treated this way: On the day of the spinoff, your cost basis of the original stock is reduced by the percentage value of the spinoff. The cost basis of the spinoff is its percentage value of the deal. Damn, that's unclear. Example: You buy 100 shares of ABC on 1/1/97 @ $100 each ($10000) On 4/15/98, ABC spins off its subsidiary XYZ and you get 50 shares. At the close of business of 4/15/97, ABC is $75 per share and XYZ is $40 per share. You still have 100 ABC worth $7500 and 50 XYZ worth $2000, total $9500. The cost basis of the XYZ is $10000 * (2000/9500) or $2105. The cost basis of your ABC is $10000 * (7500/9500) or $8895. No tax is due based on the spinoff, in nearly all cases. The company will advise you of this. Your acquisition date for long term treatment for both ABC and XYZ is 1/1/97, not the spinoff date. I hope this helps you. Pete F.