Alcoa Inc. spun off Alcoa Corp effective October 31, 2016. Alcoa Inc. then changed its name to Arconix and ticker symbol to ARNC.
The new Alcoa Corp kept the original Alcoa ticker symbol AA.
This action is a standard spinoff transaction in the accounting software. Neither ARNC nor AA has posted a copy of IRS form 8937 at the time of writing these instructions. Cost basis allocation was calculated using the closing prices of ARNC and AA on 10/31/16
The information below is based on the information available from the press releases from Alcoa Inc. and Alcoa Corp posted on their web site. Please note that Alcoa Inc. changed its ticker and name after the spinoff. Because the daughter company has taken on the ticker symbol of the parent company, the spinoff will separate the parent, from the new company, instead of the normal process where the new company separates from the parent. This requires adding a reverse split transaction after the spinoff, but we feel this is easier than trying to adjust the name and ticker of one company, and then adding a whole new one, with a similar name, and the same ticker as the old.
Keep in mind: Alcoa performed a reverse stock split in early October (Most clubs will see this on 10/06/16). Make sure that you have entered this reverse stock split (split ratio is 1 for 3) *before* you take the steps listed below.
The Spinoff 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_spinoff
Here is the information you need to complete the spinoff.
The Spinoff Entry:
Select Parent Security (or Parent Company) : Alcoa Corp (AA)
Remaining Basis Percentage: 19.93
Cash received: See your broker statement for cash-in-lieu received
Spinoff Security (or Symbol of New Company) : Arconix (ARNC)
Shares received : (# of original AA shares owned) (Remember to include fractional shares.)
For example, if you owned 100 AA shares, you should receive 100 ARNC shares.
Price Per Share : 28.72 (Closing price on 10/312016)
Since the new AA has fewer shares than the original AA before the spinoff, and the name and ticker changes, a reverse split is needed to reduce the number of AA shares. Old AA shareholders received 1 share of the new AA for every 3 original AA shares.
Enter a stock split dated 11/1/2016 for AA.
The split ratio is 1 for 3.
Use the cash-in-lieu from your broker statement from the spinoff as the cash received in this split.
Save the transaction and the full consequences of the spinoff have been entered.
We have seen cases where the system will incorrectly use the ARNC price for the AA stock. To check for this, do the following:
The cost basis allocation is dependent on the prices used for both Alcoa Inc. and Alcoa Corp. in the cost basis calculations. In our experience brokers tend to use the prices found in the guidance companies post on their websites including IRS form 8937. As of this writing form 8937 was not available on the company web sites. If your broker does not use that guidance, the cost basis of the companies involved as recorded in your accounting records and in your broker’s records will not match. This is not cause for concern. This is just due to the inexact nature of the tax code in this regard. Partnership tax returns have specific areas to reconcile these usually small differences. ICLUBcentral tax printer software automatically fills in these adjustments in the normal operation of the software using the data imported from your accounting records and that you enter from your 1099.