Honeywell spun off Garrett Motion, Inc. effective October 1, 2018 in a transaction meant to be tax-free to its shareholders. Garrett Motion, Inc. began regular trading on the NYSE on Monday, October 1, 2018.
No cost basis information was posted to the Honeywell website when these instructions were written. The remaining basis percentage was calculated using the opening prices of HON and GTX on 10/1/18.
This transaction can be entered as a standard spinoff in the accounting system. The information below is based on the information available on the Honeywell web site and IRS guidelines for calculating cost basis for spinoffs.
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) : Honeywell (HON)
Remaining Basis Percentage: 98.95
Cash received: See your broker statement for cash-in-lieu received
Spinoff Security (or Symbol of New Company) : Garrett Motion, Inc. Corp (GTX)
Shares received : 0.1 x (# of HON shares owned) (Remember to include fractional shares.)
For example, if you owned 100 HON shares, you should receive 0.1 x 100 = 10 GTX shares.
Price Per Share : 17.60 (Opening price on 10/1/2018)
Save the transaction and the spinoff has been entered.
The cost basis allocation is dependent on the prices used for both Honeywell and Garrett Motion, Inc. 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.
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