Xerox spun off Conduent effective December 31, 2016 in a transaction meant to be tax-free to its shareholders. The cost basis allocation information is from IRS form 8937. A full explanation can be found in the attachment to this form is found on the Xerox web site at https://www.news.xerox.com/internal_redirect/cms.ipressroom.com.s3.amazonaws.com/84/files/20170/Attachment%20to%20Form%208937.pdf . This link opens the PDF file of the attachment to IRS form 8937. In their example, Xerox used the closing prices on January 3, 2017 to calculate the cost basis allocation.
This action is a simple spinoff transaction in the accounting software. The information below is based on the information available from the cost basis allocation information on the Xerox web site.
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: 12/30/2016 (So no transactions dated on your allocation date)
Select Parent Security (or Parent Company) : Xerox (XRX)
Remaining Basis Percentage: 71.5175
Cash received: See your broker statement for cash-in-lieu received
Spinoff Security (or Symbol of New Company): Conduent Corp (CNDT)
Shares received: 0.2 x (# of XRX shares owned) (Remember to include fractional shares.)
For example, if you owned 100 XRX shares, you should receive 0.2 x 100 = 20 CNDT shares.
Price Per Share: 13.72 (Closing price of CNDT on 1/3/2017)
Save the transaction and the spinoff has been entered.
The cost basis allocation is dependent on the prices used for both Xerox and Conduent 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 should not be 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.