Brookfield Asset Management split the company into Brookfield Asset Management and Brookfield Reinsurance. Holders of BAM received one (1) share of BAMR for each 145 BAM shares owned. The structure of the spinoff of Brookfield Reinsurance shares was as a taxable dividend. The SEC filing for this spinoff states there is uncertainty about the tax consequences of this spinoff. There are two main questions with high uncertainty. Will BAM or BAMR be considered Passive Foreign Investment Companies (PFIC) and will the distribution of the BAMR shares be considered a dividend. Guidance from the companies is that neither BAM nor BAMR will be considered a PFIC. To the best of their knowledge, the distribution will be considered a dividend. These instructions assume the company guidance is accurate.
The SEC filing for this spinoff can be found on the SEC EDGAR web site at the following URL: https://www.sec.gov/Archives/edgar/data/0001837429/000119312521191774/d72516d424b3.htm
Resolution:
This action will need at least two entries in the accounting software. The information below is based on the information available from BAM. To be considered a dividend the value of this distribution must come from retained and current earnings. IF BAM 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. If this assumption is incorrect you will need to adjust the nature of the distribution at a later date.
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: 6/28/2021
Select Transaction Type : Dividend or Distribution
Amount: [53.00 x 0.0069 x (# of BAM shares owned)
# of BAMR shares received = 0.0069 x (# of BAM shares owned)
53.00 = opening price of BAMR shares on the first regular trading day, 6/28/2021
For example, if you owned 300 shares of BAM your amount would be
53.00 x 0.0069 x 300 = 109.71
Ex-Dividend date: 6/28/2021
Type : Dividend
Select Security: Brookfield Asset Management (BAM)
Save the transaction and the dividend has been entered.
The 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: 6/28/2021
Select Security : Brookfield Reinsurance (BAMR)
Number of Shares Bought : 0.0069 x (# of BAM shares owned). Include fractional portion.
Net Total of Purchase: Use the same value as the Amount from the dividend entry above.
Be sure to use the same cash account for the Dividend entry and the Buy entry.
If your buy transaction included fractional BAMR shares, continue to the next step. If not, you are done with this spinoff
The Sell Entry
Go to Accounting > Securities > Sell depending on the version of the software being used.
Here is the information you need to complete the sell.
Date: 6/28/2021
Select Security : Brookfield Reinsurance (BAMR)
Number of Shares Sold : The fractional part of the shares bought in the Buy Transaction.
Net Proceeds: Use the cash-in-lieu amount from your broker statement.
When saved you are finally done with all transactions related to this spinoff.
NOTE: It is possible you will need to edit the distribution (dividend) entry after receiving information from BAM and/or BAMR on the true nature of the distribution entry dated 6/28/2021. This determination will be done at the end of the tax year for BAM. Rather than a dividend it may be part dividend and part return of capital.
The companies stated the price for the cash-in-lieu payments will be an average of the first five trading days for BAMR. The fractional share sale will probably be dated several days after the spinoff on broker statements.
