IBM spun off Kyndryl effective November 3, 2021 in a transaction meant to be tax-free to IBM shareholders. Kyndryl began normal trading on November 4, 2021. IBM shareholders received 0.20 shares of KD for each share of IBM owned.

Resolution:

This action is a simple spinoff transaction in the accounting software. It is structured to be a non-taxable event for IBM shareholders. The cost basis allocation information is calculated from the opening prices of KD and IBM on the first day of normal trading for Kyndryl  . No IRS form 8937 was posted on the IBM website when these instructions were written. IBM has indicated a form 8937 will be posted on their web site before the end of November 2021.

NOTE:

The cost basis allocation is dependent on the prices used for both IBM and Kyndryl in the cost basis allocation 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.

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: http://www.iclub.com/support/kb/default.asp?page=normal_spinoff

Here is the information you need to complete the spinoff.

• Date: 11/3/2021
• Select Parent Security (or Parent Company) : IBM (IBM)
• Remaining Basis Percentage: 95.6
• Cash received:  See your broker statement for cash-in-lieu received
• Spinoff  Security (or Symbol of New Company) : Kyndryl (KD)
•  Shares received : 0.20 x (# of IBM  shares owned)   (Remember to include fractional shares.)
  • For example, if you owned 100 IBM shares, you should receive 0.20 x 100 = 20 KD shares.
• Price Per Share : 28.41   (Opening price on 11/4/2021)                                                                 

Save the transaction and the spinoff has been entered.