Cousins Properties merged with Parkway, Inc. in a tax-free reorganization. The combined company then did a spinoff of new Parkway, taking certain assets in the Houston area. The spinoff was accomplished as a taxable distribution of new Parkway shares.
The SEC filing for this merger and spinoff can be found on the Cousins Properties website site at the following URL: https://www.snl.com/irweblinkx/corporateprofile.aspx?iid=102939
Choose the link for the 2016 Merger Proxy.
This transaction will need at least three entries in the accounting software. The information below is based on the information available from CUZ. To be considered a dividend the value of this spinoff distribution must come from retained and current earnings. If the combined company does not have enough earnings some or all of this distribution will be considered a return of capital. These instructions assume the full distribution will be considered a dividend. If this assumption is incorrect you will need to adjust the nature of the distribution at a later date. The true nature of the distribution may not be known until the end of the tax year for CUZ.
The Merger Entry
Go to Transactions > Merger or Accounting > Securities > Record merger of securities depending on the version of the software being used. If you are unfamiliar with merger transactions you can get help at this URL: https://www.iclub.com/support/kb/default.asp?page=normal_merger
Here is the information you need to complete the merger.
These instructions are for owners of original Parkway shares. If you owned only Cousins (CUZ) shares before this transaction skip to the Dividend Entry.
Old Security or Merging Company: Parkway Inc. (PKY)
Price per share of old Security / PKY: 16.53
Cash received: See your broker statement for cash-in-lieu
New Security: Cousins Properties (CUZ)
Shares received : 1.63 x (#of PKY shares owned)
(Remember to include fractional shares.)
Price per share of new Security: 9.99
For example, if you owned 100 PKY shares, you should receive 1.63 x 100 = 163 CUZ shares.
Save the transaction and the merger has been entered.
The Spinoff Related Entries
The Dividend Entry
Go to Transactions > Dividend or Distribution or Accounting > Securities > Cash Distribution depending on the version of the software being used. Here is the information you need to complete the dividend entry.
Select Transaction Type : Dividend or Distribution
Amount: 20.81 x (# of PKY shares owned)
# of PKY shares received = 1.0 x (# of CUZ shares owned)
20.81 = closing price of new PKY shares on the first regular trading day, 10/7/16
For example if you owned 100 shares of CUZ your amount would be
20.81 x 100 = 2081
Ex Dividend date: 10/7/2016
Type : Dividend
Select Security: Cousins Properties (CUZ)
Save the transaction and the dividend has been entered.
The Buy Entry
Go to Transactions > Buy or Accounting > Securities > Buy depending on the version of the software being used.
Here is the information you need to complete the buy.
Select Security: Parkway Inc. (PKY)
Number of Shares Bought: same as # of CUZ shares owned.
Net Total of Purchase: Use the same value as the Amount from the dividend entry above.
If you received 100 PKY shares, buy 100 for the 2081.00 calculated above.
Be sure to use the same cash account for the Dividend entry and the Buy entry.
If your buy transaction included fractional PKY shares, continue to the next step. If not, you are done with this spinoff
Sale of Fractional Shares
Go to Transactions > Sell or Accounting > Securities > Sell depending on the version of the software being used.
Here is the information you need to complete the sell.
Select Security: Parkway Inc. (PKY)
Number of Shares Sold : The fractional part of the shares bought in the Buy Transaction.
Net Proceeds: Use the cash-in-lieu amount from your broker statement.
When saved you are finally done with all transactions related to this spinoff.
NOTE: It is possible you will need to edit the distribution (dividend) entry after receiving information from CUZ and/or PKY on the true nature of the distribution entry dated 10/7/16. This determination will be done at the end of the tax year for CUZ. Rather than a dividend it may be part dividend and part return of capital. Also, the value of the dividend depends on the price used for the new PKY shares. These instructions used the lower closing price to minimize tax consequences. Your broker may use a different price and therefore have a different cost basis for the new PKY shares. Because of the lack of detail in the tax code, both our choice and your broker’s choices would be reasonable estimates of market value for the shares received. Your records are NOT incorrect because they differ from your broker. Tax return forms do have specific areas to report these usually small differences. Our tax printer software handles these adjustment entries automatically in the normal operation of the software.