AT&T (T) spinoff of Warner, forming Warner Brothers Discovery (WBD)

AT&T spun off their Warner Brothers unit which then merged with Discovery to form Warner Brothers Discovery effective 11 April 2022 in a transaction meant to be tax-free to AT&T shareholders. Warner Brothers Discovery began normal trading on 11 April 2022. AT&T shareholders received 0.241917 shares of WBD for each share of T owned.

 

Resolution:

This action is a simple spinoff transaction in the accounting software. It is structured to be a non-taxable event for AT&T shareholders. The cost basis allocation information is calculated from the average of the opening and closing prices of WBD and T on the effective date of the spinoff. A form 8937 was not available when these instructions were written

NOTE:

The cost basis allocation is dependent on the prices used for both AT&T and Warner Brothers Discovery 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: 4/11/2022
  • Select Parent Security (or Parent Company) : AT&T (T)
  • Remaining Basis Percentage: 76.52
  • Cash received:  See your broker statement for cash-in-lieu received
  • Spinoff  Security (or Symbol of New Company) : Warner Brothers Discovery (WBD)
  •  Shares received : 0.241917 x (# of T shares owned)   (Remember to include fractional shares.)
    • For example, if you owned 100 T shares, you should receive 0.241917 x 100 = 24.1917 WBD shares.
  • Price Per Share : 24.43   (Average of opening and closing prices on 4/11/2022)                          

Save the transaction and the spinoff has been entered.