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Spinoff of IAA (IAA) from KAR Auction (KAR)

KAR Auction spun off IAA effective June 28, 2019 in a transaction meant to be tax-free to its shareholders. IAA began normal trading on the NYSE on Friday, June 28, 2019.

The cost basis allocation information was calculated using the average of the opening and closing prices of IAA and KAR on 6/28/19. An IRS form 8937 was not available on the KAR web site when these instructions were written.

 

This action is a standard spinoff transaction in the accounting software.  The information below is based on the information available the KAR Auction 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: 6/28/2019
  • Select Parent Security (or Parent Company) : KAR Auction (KAR)
  • Remaining Basis Percentage: 38.637
  • Cash received:  See your broker statement for cash-in-lieu received
  • Spinoff  Security (or Symbol of New Company) : IAA (IAA)
  • Shares received : 1.0 x (# of KAR  shares owned)   (Remember to include fractional shares.)
    • For example, if you owned 100 KAR shares, you should receive 1.0 x 100 = 100 IAA shares.
  • Price Per Share : 38.64  (Average of open and closing prices on 6/28/2019)                                 

Save the transaction and the spinoff has been entered.

 

NOTE:

The cost basis allocation is dependent on the prices used for both KAR Auction and IAA 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.