Johnson Controls split the company into Johnson Controls and Adient. The structure of the spinoff was the distribution of Adient shares as a taxable distribution.
The SEC filing for this spinoff can be found through the SEC filings on the Johnson Controls web site at the following URL: https://investors.johnsoncontrols.com/about-the-spin-off
Choose the form 10-12B dated 6/27/2016.
This action will need at least two entries in the accounting software. The information below is based on the information available from JCI. To be considered a dividend the value of this distribution must come from retained and current earnings. IF JCI 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.
Amendment – After the first writing of these instructions it was found JCI was a foreign based company and the dividend amount was not being recorded as foreign income. These instructions have been amended so this transaction is tagged as foreign income and will be included as foreign income on tax returns prepared by our tax printer software.
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.
Select Transaction Type : Dividend or Distribution
Amount: [45.51 x .1 x (# of JCI shares owned)
# of ADNT shares received = .1 x (# of JCI shares owned)
45.51 = closing price of ADNT shares on the first regular trading day, 10/31/16
For example if you owned 100 shares of JCI your amount would be
45.51 x .1 x 100 = 455.10
Ex Dividend date: 10/24/2016
Type : Dividend
Select Security: Johnson Controls (JCI)
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.
Select Security : Adient (ADNT)
Number of Shares Bought : .1 x (# of JCI shares owned).
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 ADNT shares, continue to the next step. If not, you are done with this spinoff
Foreign Tax Entry
Use the Foreign tax paid or Record a Foreign tax links to enter this portion.
Company: Johnson Controls
Amount of tax: .01
Use of the foreign tax entry will tag the dividend received on this day as from a foreign company for our tax printer. The dividend entered above plus the .01 tax will be included in foreign income on Schedule K.
The Sell Entry
Go to Transactions > Sell or Accounting > Securities > Sell depending on the version of the software being used.
Here is the information you need to complete the sell.
Select Security : Adient (ADNT)
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 JCI and/or ADNT on the true nature of the distribution entry dated 10/31/16. This determination will be done at the end of the tax year for JCI. Rather than a dividend it may be part dividend and part return of capital. Also, the value of the dividend depends on the price used for the ADNT shares. These instructions used the lower closing price to minimize tax consequences. Your broker may use a different price and therefore have a different cost basis for the ADNT shares. Because of the lack of detail in the tax code, both our choice and your broker’s choices would be reasonable estimates of market value for the shares received. Your records are NOT incorrect because they differ from your broker. Tax return forms do have specific areas to report these usually small differences. Our tax printer software handles these adjustment entries automatically in the normal operation of the software.