General Electric did a split-off of its capital group into a new company, Synchrony Financial, via a share exchange.
General Electric is considered the parent company. Due to the nature of the transaction, the number of shares of GE owned by those participating in the exchange is decreased.
Information about this exchange, including the cost basis allocation information can be found on the General Electric site web site at:
Use the Investor Relations drop down menu to choose GE Synchrony Exchange. Once on the new exchange information page choose the Prospectus link.
This transaction will need two entries in the accounting system, a spinoff, and a stock split.
The first entry is a spinoff transaction. While the spinoff transaction has the option to use either a price per share, or Remaining basis percentage, this transaction is unique enough that you will need to use the Remaining basis percentage, to transfer the correct cost basis from GE to Synchrony Financial.
The remaining basis percentage will vary with each investor and will depend on the number of GE shares actually exchanged. This offer was oversubscribed. Shares tendered in this offer may be subject to proration. The proration ration announced by GE was 31.287%. This means shares actually exchanged would be reduced to 31.287% of the shares tendered for exchange. Tendered shares of less than 100 shares (odd lots) were not subject to proration. The second entry will be a reverse stock split to decrease the number of shares of GE. The information below is based on the information available from General Electric document referenced above.
The Spinoff Entry:
First, calculate your Remaining Basis percentage:
Subtract the shares that were exchanged from the shares you owned before the exchange. _______________
Divide that number by the shares owned before the exchange. The result will be the Remaining Basis Percentage._________________
For example, if you owned 200 shares of GE before the exchange and you tendered 100 shares, only 31.287 were actually exchanged. Your remaining basis for GE shares would be (200 -31.287)/200 = 84.357% (rounded).
Remember every owner of GE stock will need to calculate this number individually. Unlike a normal spinoff this number will vary with the particular facts for each GE shareholder.
Once you have the Remaining Basis Percentage, go to Transactions > Spinoff -or- Accounting > Securities > Record spinoff of securities, depending on the if you are using Club Accounting 3 on the desktop, or the myICLUB.com web site.
If you are unfamiliar with spinoff transactions you can get help at this URL: https://www.iclub.com/support/kb/default.asp?page=normal_spinoff
Here is the rest of the information you need to complete the spinoff.
Save the transaction and the spinoff has been entered.
The Stock Split Entry
Go to Transactions > Spinoff -or- Accounting > Securities > Record spinoff of securities depending on the version of the software being used. If you are unfamiliar with spinoff transactions you can get help at this URL: https://www.iclub.com/support/kb/default.asp?page=normal_split
To complete the split, you will need to calculate your split ratio. This ratio will be (# GE shares before exchange) to ( #GE shares owned after exchange). For the previous example with 200 shares owned before the exchange and 31.287 shares exchanged, the split ration would be 200 to 168.713. (200-31.287 =168.713.) Please include the fractional portion of the split ratio. Your broker will probably sell the fractional amount. The cash received is part of the data for the split entry.
Security : General Electric
Split Ratio : Use the ratio calculated above
Cash for Fractional Share : See your broker statement. Do not confuse the amount with the cash received for fractional shares in the spinoff described above.
Save the transaction and the reverse split has been entered.
These transactions will transfer the cost basis and holding period of the exchanged GE shares to the SYF shares received in the exchange. It will decrease the cost basis of the remaining GE shares and adjust the number of shares of GE to the post-exchange amount owned.