General Electric spun-off its transportation division into a very short lived company known as SPINCO. This company was then immediately merged into Wabtech (WAB). The structure of the spinoff was the distribution of SPINCO shares as a taxable distribution. The merger of Spinco into WAB is also a taxable event.
This action will need multiple entries into the accounting software. The information below is based on the information available in the SEC filing. To be considered a dividend the value of this distribution must come from retained and current earnings. IF GE 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. The SEC filing indicates this assumption should be made. If this assumption is incorrect you will need to adjust the nature of the distribution at a later date.
A few notes on the transactions listed below:
We use several dates when listing the transactions you will enter. If these aren't the dates your broker used, that's OK. We do this primarily so that when you look back at the club records, it will be easier to see a progression of what happened with this transaction. GE issued some money, created SPINCO, and then the merger with Wabtec happened. As long as you keep the transactions in the order we suggest, the specific dates you use are up to you.
The SPINCO (ticker: GESPIN) was a temporary company. When filling in the First Buy and First Sell transactions in myICLUB, the automatic suggestion will be blank. This is OK, just tab to the next field after typing in the ticker.
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.
Date: 2/24/2019
Select Transaction Type: Dividend or Distribution
Amount: [73.45 x .0054 x (# of GE shares owned)]
For example if you owned 100 shares of GE your amount would be: 73.45 x .0054 x 100 = 39.66
Ex-Dividend date: 2/24/19
Type : Dividend
Select Security: General Electric (GE)
Save the transaction and the dividend has been entered.
The First 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.
Date: 2/25/2019
Select Security: SPINCO (GESPIN) This is a made up ticker for SPINCO.
Number of Shares Bought : .0054 x (# of GE shares owned).
For example, if you owned 100 GE shares then buy .54 SPINCO.
For exmple, if you owned 200 shares then buy 1.08 SPINCO shares.
Net Total of Purchase: Use the same value as the Amount from the dividend entry above.
The First Sell Entry
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.
Date: 2/25/19
Select Security: SPINCO (GESPIN)
Number of Shares Sold : The total number of SPINCO shares bought above
Net Proceeds: Use the same amount as the dividend/SPINCO purchase, from above.
The Second 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.
Date: 2/26/2019
Select Security: Wabtec (WAB)
Number of Shares Bought : .0054 x (# of GE shares owned).
For example, if you owned 100 GE shares then buy .54 WAB.
For example, if you owned 200 shares then buy 1.08 WAB shares.
Net Total of Purchase: Use the same value as the Amount from the initial dividend entry above.
The Final Sell Entry
Here is the information you need to complete the sell.
Date: 2/27/19
Select Security: Wabtec (WAB)
Number of Shares Sold : The fractional portion (everything to the right of the decimal) of the shares of WAB purchased in the previous transaction.
Net Proceeds: The cash-in-lieu from your broker statement.
This ends the entries to account for this merger.
NOTE: It is possible you will need to edit the distribution (dividend) entry after receiving information from GE on the true nature of the distribution entry dated 2/24/19. This determination will be done at the end of the tax year for GE. Rather than a dividend it may be part dividend and part return of capital.
