3M split off its food safety business which then merged with Neogen effective September 1, 2022. Shareholders of 3M were offered to exchange some or all of their 3M shares for shares the food safety business which then merged with Neogen  in a transaction meant to be tax-free to its shareholders.

The cost basis allocation information is from form S-4/A filed by Neogen with the SEC dated August 4, 2022.  Here is a link to that filing on the SEC EDGAR service: https://www.sec.gov/Archives/edgar/data/711377/000114036122028130/ny20004078x19_s4a.htm#tTAX .

The exchange was oversubscribed and the 3M shares offered for exchange that were actually exchanged were reduced by a proration factor. Shareholders who offered odd lots of 3M for exchange were not subject to proration.

Resolution:

This action requires a simple spinoff transaction in the accounting software followed by a reverse stock split to account for the reduction of 3M shares. In the special situation where all 3M shares owned were accepted for exchange, the transaction should be entered as a merger. Instructions for this situation will be the last item in this document. The information below is based on the information available from form S-4/A filed by Neogen mentioned above.

The Spinoff Entry

Go to Transactions > Spinoff  or Accounting > Securities > Record stock split 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.

The remaining basis percentage will vary with each 3M shareholder. It is related to the shares exchanged to the total shares owned before the exchange. This method treats the exchanged shares as coming proportionally from all tax lots.

• Date: 9/1/2022
• Select Parent Security (or Parent Company) : 3M(MMM)
• Remaining Basis Percentage: (shares exchanged/shares owned before transaction) x 100
  • For example, 15 shares accepted for exchange and 200 shares owned before the transaction. Remaining basis percentage would be (15/200) x 100 = 7.5
• Cash received:  See your broker statement for cash-in-lieu received
• Spinoff  Security (or Symbol of New Company) : Neogen  (NEOG)
• Shares received : 6.7713 x (# of MMM  shares exchanged)   (Remember to include fractional shares.)
  • For example, if you exchanged 15 MMM shares, you should receive 6.7713 x 15 = 101.5695  NEOG shares.
• Price Per Share : 19.615  (Average of open and close  price on 9/1/2022)  

Save the transaction and the spinoff  portion has been entered.

The Stock Split Entry

Go to Transactions > Stock Split  or Accounting > Securities > Record stock split

The split ratio will vary with each MMM shareholder based on the shares exchanged.

• Date: 9/2/2022
• Company: 3M (MMM)
• Split ratio:  shares owned after transaction for shares owned before transaction
  • For example, 200 shares owned before transaction and 15 shares exchanged leaving 185 after the transaction. The split ratio would be 185 for 200.
• Cash for fractional share:  See your broker statement

Save the transaction and the reverse split portion has been completed.

NOTE:

The cost basis allocation is dependent on the proportion of 3M shares exchanged to the total 3M shares held before the transaction. Additionally, the method of accounting for this transaction described will take exchanged shares proportionally from all 3M tax lots Your broker may use a different method to determine what shares are exchanged, for example First-In-First-Out.  If your broker does not use the same method to determine which tax lots are exchanged, 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.

Special Situation – All 3M shares owned accepted for exchange.

If all 3M shares owned were accepted for exchange, treat this transaction as a merger of 3M and Neogen.

Here is the information needed for a complete exchange of 3M for Neogen.

• Date: 9/1/2022
• Old Security or Merging Company: 3M (MMM)
• Price per share of old Security / :  myICLUB defaults to closing price on transaction date
• Cash received:  See your broker statement for cash-in-lieu
• New Security: Neogen (NEOG)
• New Security Price: 19.615   (Average of open and close prices on 9/1/2022)
• Shares received : 6.7713 x (# of MMM shares owned).  Remember to include fractional shares.
  • For example, if you owned 50 MMM shares, you should receive 6.7713 x 50 = 338.565 NEOG shares.

Save the transaction and the merger has been entered.