Varian Medical Systems spun off Varex Imaging effective January 30, 2017 in a transaction meant to be tax-free to its shareholders. The remaining basis percentage information listed below was calculated according to IRS regulation. The equation for that calculation is: (value of parent post spinoff)/ (total value of parent and daughter post spinoff). When these instructions were written neither VAR nor VREX had posted IRS form 8937 or any other documents with cost basis calculation examples. These instructions use the average of the opening and closing prices of VAR and VREX on 1/30/17 to calculate the cost basis allocation for this spinoff.
This is a standard spinoff transaction in the accounting software. The remaining Basis Percentage information below is based on IRS cost basis allocation regulations.
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.
Date: 1/30/17
Select Parent Security (or Parent Company) : Varian Medical Systems (VAR)
Remaining Basis Percentage: 88.16
Cash received: See your broker statement for cash-in-lieu received
Spinoff Security (or Symbol of New Company) : Varex Imaging (VREX)
Shares received : 0.4 x (# of VAR shares owned) (Remember to include fractional shares.)
For example, if you owned 100 VAR shares, you should receive 0.4 x 100 = 40 VREX shares.
Price Per Share : 26.14 (Average of opening and closing price on 1/30/17)
Save the transaction and the spinoff has been entered.
NOTE:
The cost basis allocation is dependent on the prices used for both Varian Medical Systems and Varex Imaging 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. 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.