SPINOFF: Tyco International (TYC) to Tyco Electronics (TEL) and Covidien (COV)

Issue:

On June 29, 2007 Tyco International Ltd. [TYC] issued two spinoff stocks, Tyco Electronics Ltd. [TEL] and Covidien Ltd. [COV]

Cause:

This is an unusual spinoff of two companies which requires special instructions. Follow the steps listed below to enter this transaction correctly.
The details of the tax treatment of this transaction are available at http://www.tyco.com/.

Resolution:

Tyco International Ltd. [TYC] spun off two companies, Tyco Electronics Ltd. [TEL] and Covidien Ltd. [COV] to its shareholders.
On 6/29/07, each TYC shareholder received 1 share of TEL and 1 share of COV for every four shares of TYC.
The market prices of TEL and COV were $39.97 and $43.41 respectively on 7/2/07.
This is a non-taxable reorganization.
The original cost of TYC will be allocated between all three companies as of 6/29/07.

Although the Club Accounting spinoff form for allows multiple companies to spun off, enter this transaction as two separate spinoffs.
It is EXTREMELY important that the transactions be entered in the order indicated below.

First, record the receipt of the TEL shares
1. Go to Accounting > Securities > Spinoff and select [TYC] as the parent company.
2. Enter 6/29/07 as the date, and 1 for the number of daughter companies.
3. Click CONTINUE.
4. On the next page, Click the button next to Remaining Basis Percentage, and enter 70.77
5. In row 1, enter TEL for the symbol of the new company. Enter the number of shares of TEL received (make SURE to include fractional shares), and 39.97 for the price per share.
6. Enter the amount of cash, if any, received in lieu of fractional shares.
7. Click SUBMIT, Then click on the "here" link to continue.

Now record the receipt of the COV shares.
1. Go to Accounting > Securities > Spinoff and select [TYC] as the parent company.
2. Enter 6/29/07 as the date, and 1 for the number of daughter companies.
3. Click CONTINUE.
4. On the next page, Click the button next to Remaining Basis Percentage, and enter 55.1364
5. In row 1, enter COV for the symbol of the new company. Enter the number shares of COV received (make SURE to include fractional shares), and 43.41 for the price per share.
6. Enter the amount of cash, if any, received in lieu of fractional shares.
7. Click SUBMIT, Then click on the "here" link to continue.

That will take care of the spinoff transaction. When you have finished, 29.23% of the original cost of TYC should have been allocated to TEL, and 31.75% should have been allocated to COV. The cost basis of TYC should be 39.02% of the original amount.

After the above spinoff was accomplished, on June 30, 2007, TYC effected a reverse, 1 for 4, stock split. For instructions on how to enter a stock split, see http://www.iclub.com/support/kb/default.asp?page=normal_split

These steps assume you will be using the menus built in to the Club Accounting program.

First, record the receipt of the TEL shares
1. Go to Transactions > Spinoff.
2. Enter 6/29/07 as the date.
3. Select the correct account if any cash was received.
4. Click the button next to Remaining Basis Percentage, and enter 70.77
5. Select Tyco as the parent company.
6. If Tyco Electronics does not already show up in the list of potential spinoff companies, click NEW SECURITY, and add it.
7. In the spaces next to Tyco Electronics, enter the number of shares received (make SURE to include fractional shares), and 39.97 for the price per share.
8. Enter the amount of cash, if any, received in lieu of fractional shares.
9. Click OK, Then OK again to complete the transaction.

Now record the receipt of the COV shares.
1. Go to Transactions > Spinoff.
2. Enter 6/29/07 as the date.
3. Select the correct account if any cash was received.
4. Click the button next to Remaining Basis Percentage, and enter 55.1364
5. Select Tyco as the parent company.
6. If Covidien Ltd does not already show up in the list of potential spinoff companies, click NEW SECURITY, and add it.
7. In the spaces next to Covidien Ltd, enter the number of shares received (make SURE to include fractional shares), and 43.41 for the price per share.
8. Enter the amount of cash, if any, received in lieu of fractional shares.
9. Click OK, Then OK again to complete the transaction.

That will take care of the spinoff transaction. When you have finished, 29.23% of the original cost of TYC should have been allocated to TEL, and 31.75% should have been allocated to COV. The cost basis of TYC should be 39.02% of the original amount.

After the above spinoff was accomplished, on June 30, 2007, TYC effected a reverse, 1 for 4, stock split. For instructions on how to enter a stock split, see http://www.iclub.com/support/kb/default.asp?page=normal_split