XTO Energy (XTO) dividend of Hugoton Royalty Trust (HGT)

Issue:

On May 12th, 2006, XTO Energy (XTO) paid a taxable dividend in units of Hugoton Royalty Trust (HGT).

Cause:

Though this may appear at first glance to be a spinoff, this is, in fact, a taxable dividend.

Resolution:

On May 12th, 2006, XTO Energy (XTO) paid a dividend in units of Hugoton Royalty Trust (HGT).The dividend was paid based on XTO Energy's common stock held as of the April 26, 2006 record date with an ex-dividend date of April 24, 2006. With the exception of cash paid in lieu of fractional units, no cash was involved in this transaction.

Treasurers will need to enter this as two separate transactions; a dividend for XTO and a purchase of HGT.
There are two numbers to have on hand before starting this transaction.

1. The number of shares of XTO the club held on April 26th, 2006
2. The cash in lieu of fractional units received as part of this transaction

The following will need to be calculated:
1. The total number of HGT units received
2. The total value of only the whole HGT units
3. The total dividend to enter for XTO

One, determine the number of HGT units received:
a. Multiply the number of XTO shares by .059609 = _________________. This gives full and fractional units.
b. Write down only the full units here:________________

Two, determine the total value of the HGT units:
a. Multiply the whole number of units from step 2 above by $28.305 =________________. This is the value of the whole units of HGT.

Three, determine the total dividend to enter for XTO.
a. Add the value of the whole units of HGT determined above__________and the cash received as part of the transaction =___________.
This is the dividend to enter for XTO.


Steps for entering in Club Accounting 3

If the club did not already own HGT before this transaction, go to SECURITIES > ADD NEW and add HGT before continuing with this transaction. Choose OTHER PUBLICLY TRADED for type of security.

The first piece of the transaction is to enter a dividend for XTO on May 12th.

1. Go to TRANSACTIONS > DIVIDEND OR DISTRIBUTION
2. Enter the date of the Dividend as May 12th (05/12/06), and the Ex-Dividend date of April 24th (04/24/06).
3. Enter the total dividend as determined above in part 3a, above. If the club has more than one account, be sure to select the one the money went in to.
4. For the Type of transaction, choose DIVIDEND.
5. Choose XTO Energy for the stock.
6. There is no need to enter comments.
7. Click OK, and then OK again.


The next step will be to enter a purchase of Hugoton Royalty Trust (HGT) on May 13th.

1. Go to TRANSACTIONS > BUY
2. Enter the transaction date of May 13th (05/13/06)
3. Choose HGT from the list of stocks.
4. Enter the whole number of units the club received as part of this transaction, determined above in part 1b, above.
5. Enter the Net Total of the purchase, determined above in part 2a, above.
6. Enter 0.00 for Commission and Service Charge.
7. Use the same account from the dividend entry above.
8. Click OK, then OK again.


Final Step: We recommend that you sell the resulting Hugoton Royalty Trust, not due to any questions about the stock’s value, but merely to avoid the problems and additional accounting expenses of a partnership dealing with royalties.

1. Go to TRANSACTION > SELL.
2. Enter the date of the Sell.
3. Select Sell Security from the list of transactions.
4. Select the account from which the money comes.
5. Select Hugoton Royalty Trust from the list of securities.
6. Enter in the sale total as the closing price of your chosen sale date.
7. Enter 0.00 for Commission and Fees.
8. Click OK.

Steps for entering in Club Accounting Online

The first piece of the transaction is to enter a dividend for XTO on May 12th.

1. Go to ACCOUNTING > SECURITIES > CASH DIVIDEND
2. Enter the date of the Dividend as May 12th (05/12/06), and the Ex-Dividend date of April 24th (04/24/06).
3. Choose XTO Energy for the stock.
4. Enter the total dividend as determined above in part 3a. If the club has more than one account, be sure to select the one the money went in to.
5. For the Type of transaction, choose DIVIDEND.
6. There is no need to enter comments.
7. Click SUBMIT.


The next step will be to enter a purchase of Hugoton Royalty Trust (HGT) on May 13th.

1. Go to ACCOUNTING > SECURITIES > BUY
2. Enter the transaction date of May 13th (05/13/06)
3. Enter the ticker symbol HGT.
4. Enter the whole number of units the club received as part of this transaction, determined above in part 1b.
5. Enter the Cost per share, $28.305.
6. Enter 0.00 for Commission and Service Fee.
7. Use the same account from the dividend entry above.
8. Click SUBMIT


Final Step: We recommend that you sell the resulting Hugoton Royalty Trust, not due to any questions about the stock’s value, but to avoid the problems and additional accounting expenses of a partnership dealing with royalties.

1. Go to ACCOUNTING > SECURITIES > SELL
2. Enter the date of the sell transaction.
3. Select the symbol for Hugoton Royalty Trust (HGT) and click CONTINUE.
4. Enter all the shares owned in the SHARES SOLD field.
5. Enter in the SALE TOTAL as the closing price of your chosen sale date.
6. Enter 0.00 for Commission and Fees.
7. Select the account from which the money comes.
8. Click SUBMIT.


If you received a distribution from Hugoton Royalty Trust before you were able to sell it, enter the amount received in TRANSACTIONS > RETURN OF CAPITAL. At the end of the year, the K-1 or 1099 will give the exact breakdown of all the distributions. Until then, you have no way of knowing how much is taxable.