HP Enterprises spun off DXC Technology effective March 31, 2017 in a transaction meant to be tax-free to its shareholders. DXC Technology began normal trading on the NYSE on Monday, April 3, 2017.
The cost basis allocation information is from IRS form 8937. A link to this form can be found on the HP Enterprises web site at https://investors.hpe.com/~/media/Files/H/HP-Enterprise-IR/documents/everett-6045B-statement-form8937-04-26-2017.pdf . In their example, HP Enterprises used the average of the high and low prices on April 3, 2017 to calculate the cost basis allocation.
This action can be handled as a spinoff transaction in the accounting software. The information below is based on the information available from the cost basis allocation information on the HP Enterprises 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.
Select Parent Security (or Parent Company) : HP Enterprises (HPE)
Remaining Basis Percentage: 75.1
Cash received: See your broker statement for cash-in-lieu received
Spinoff Security (or Symbol of New Company) : DXC Technology Corp (DXC)
Shares received : 0.08594 x (# of HPE shares owned) (Remember to include fractional shares.)
For example, if you owned 100 HPE shares, you should receive 0.08594 x 100 = 8.594 DXC shares.
Price Per Share : 68.64 (Average of high and low price on 4/3/2017)
Save the transaction and the spinoff has been entered.
The cost basis allocation is dependent on the prices used for both HP Enterprises and DXC Technology 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.