Johnson & Johnson (JNJ) split off of Kenvue (KVUE). August 2023

Johnson & Johnson split off Kenvue via an exchange offer of JNJ shares for KVUE shares. The final results of the exchange offer were reported August 23, 2023. The transaction was meant to be tax-free to its shareholders. The exchange offer was oversubscribed so many JNJ shareholders had far fewer JNJ shares exchanged than they offered for exchange.

No cost basis allocation information was posted on the company websites for this transaction when these instructions were written.

Resolution:

For JNJ shareholders who tendered and had accepted ALL their JNJ shares in the exchange offer, this transaction can be entered as a merger.

For JNJ shareholders who tendered a portion of their JNJ shares this action requires a simple spinoff transaction in the accounting software followed by a reverse stock split. The remaining basis percentage for the spinoff transaction and the reverse split ratio will vary with each JNJ shareholder and will need to be calculated before entering the respective transactions.

Please note: This tender offer was oversubscribed. Odd lots offered in the exchange were not subject to proration. All other tender offers had the accepted shares for exchange reduced to 23.2318% of the shares offered. For example, if a JNJ shareholder tendered 200 shares for exchange, then only 0.232318 x 200 = 46.4636 shares would be accepted for exchange. This will probably be rounded to whole shares but the SEC filing did not expressly state this. The tax consequences section did state the only possible tax consequences would be the from the sale of fractional shares of KVUE, implying no fractional JNJ shares will be involved. However, please check your broker statements to confirm fractional JNJ shares were not exchanged.

For JNJ shareholders who had ALL their JNJ shares exchanged for KVUE shares.

The Merger Entry

Go to Accounting > Securities > Record merger of securities in myICLUB. If you are unfamiliar with merger transactions you can get help at this URL:

https://www.iclub.com/faq/Home/Article?id=52

Here is the information needed for the exchange of ALL JNJ shares owned for KVUE shares.

Date: 8/23/2023
Old Security or Merging Company: Johnson & Johnson (JNJ)
Price per share of old Security / : Use last JNJ valuation, if needed
Cash received: See your broker statement for cash-in-lieu
New Security: Kenvue (KVUE)
New Security Price: 23.62 (Closing price on 8/23/2023)
Shares received : 8.0324 x (# of JNJ shares accepted for the tender offer). (Remember to include fractional shares.)
- For example, if you owned 100 JNJ shares and all were accepted in the tender offer , you should receive 8.0324 x 100 = 803.24 KVUE shares.

Save the transaction and the merger has been entered.

For JNJ shareholders who did not have ALL their JNJ shares exchanged for KVUE shares.

The remaining basis percentage to use should be calculated before entering the spinoff transaction. This varies with each JNJ shareholder. For this transaction, the remaining basis percentage is the ratio of JNJ shares held after the exchange to those held before the exchange.

For example:

300 shares of JNJ were held before the exchange, 200 shares were tendered and 46 shares accepted in the exchange.
After the exchange 300 - 46 = 254 shares were still owned.
For this JNJ shareholder the remaining basis percentage would be (254/300) x 100 = 84.667%. For the remaining basis percentage, 84.667 would be entered.

The Spinoff Entry

Go to Transactions > Spinoff . If you are unfamiliar with spinoff transactions you can get help at this URL: https://www.iclub.com/faq/Home/Article?id=54

Here is the information you need to complete the spinoff.

Date: 8/23/2023
Select Parent Security (or Parent Company) : Johnson & Johnson (JNJ)
Remaining Basis Percentage: Use your calculated percentage described above
- (Shares of JNJ after the Exchange Divided By Shares before the Exchange) X 100
Cash received: See your broker statement for cash-in-lieu received
Spinoff Security (or Symbol of New Company) : Kenvue Corp (KVUE)
Shares received : 8.0324 x (# of JNJ shares accepted for exchange) (Remember to include fractional shares.)
- For example, if you had 100 JNJ shares accepted for exchange, you should receive 8.0324 x 100 = 803.24 KVUE shares.
Price Per Share : 23.62 (Closing price on 8/23/2023)

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 for this transaction varies with each JNJ shareholder. It is easy to calculate. It will be (# of shares owned after the exchange for # of shares owned before the exchange. Using the example above of 254 shares after the exchange and 300 shares before the exchange, the split ratio for that JNJ share holder would be 254 for 300.

Date: 8/24/2023
Company: Johnson & Johnson (JNJ)
Split ratio: Use the ratio calculated as described above.
Cash for fractional share: See your broker statement

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

NOTE:

Following these instructions will take exchanged shares from each tax lot in proportion to that tax lot’s number of shares. The cost basis allocation in this transaction is dependent on the shares accepted for exchange, the total JNJ shares owned before the exchange and the total basis of all shares of Johnson & Johnson. This varies with each JNJ shareholder. In our experience brokers tend to use the cost basis guidance found in company postings on their websites, including IRS form 8937, if available. 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.