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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (13780)	8/15/1998 1:19:00 AM
From: jpbrody	Read Replies (1) \| Respond to of 152472

Qualcomm SpinCo. I haven't heard much discussion here about the merits of holding/selling SpinCo shares. The filing is at the SEC ( edgar.sec.gov ) and it should happen in the next month or so. The filing seems to be preliminary, but it looks like the "record date" will be in August and the "distribution date" will be September 15th. If you hold 400 shares of QCOM on the record date, you will receive 100 shares of SpinCo on the distribution date. (Maurice -- shouldn't QCOM share price drop about 20% on the record date? Is this taken into account in your price predictions?) What about taxes? I can understand the first sentence of this tax paragraph, but then I get lost. Can any of you gnarly accountants explain this to me? It is expected that the Distribution will be a taxable distribution to each Holder in an amount equal to the fair market value on the date of the distribution of the SpinCo Shares plus the cash intended to represent the fair market value of fractional SpinCo Shares distributed to such Holder. Each Holder's portion of the Distribution will be taxable as ordinary income to the extent of such Holder's pro rata share of the current and accumulated earnings and profits ("E&P") of QUALCOMM, measured as of the end of the fiscal year in which the Distribution occurs (which is expected to be the fiscal year ending September 27, 1998). If the Holder's share of the Distribution exceeds such Holder's pro rata share of E&P, the excess will be treated first as a basis-reducing, tax-free return of capital to the extent of the Holder's adjusted tax basis in each QUALCOMM share, and then as a capital gain (treated as short-term, mid-term or long-term depending on the duration the Holder has held each of its QUALCOMM shares). The amount of E&P per share of QUALCOMM Common Stock is not expected to exceed $4.00.