I bought 250 shares of company A in 2008, in 2012 it spun off company B and I received 125 shares in this new company. In 2013 I sold the 125 shares in company B but I still own the original 250 shares in company A. How do I work out the capital gains tax due. My thinking was that the cost of the shares in company B were zero as I did not buy them they were spun off, so the cgt is the total value of the shares when sold. However from searching on the internet, the cost of the shares in company B is the difference in the stock price in company A on the day before the spin off and the day after the spin off. If company A was $70 on the day before the spin off and the fell to $55 on the day after the spin off then the cost of company B is $15 x 250/150. is this correct in irish system
tax treatment of spin off shares
- Thread starter joe sod
- Start date
Brendan Burgess
Founder
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- 54,879
If it's an Irish company, the Revenue usually issues an acquisition price for the new shares.
I think that this is a fair valuation. Revenue is unlikely to query it unless it's for a very large amount. If it's a large amount e.g. €20,000 of a gain, you could put in a note to show your calculation.
I think that this is a fair valuation. Revenue is unlikely to query it unless it's for a very large amount. If it's a large amount e.g. €20,000 of a gain, you could put in a note to show your calculation.
thanks for that, i know it is tiring for people to reply to calculations. I was in a rush when i posted it. I presume the cost of the shares of company A are now $55 (the shares were bought for $72) rather than $72. I havn't sold these yet so this issue is not important now. Thanks for clarifying.. appreciated
Brendan Burgess
Founder
- Messages
- 54,879
It's probably easiest to do it in Table form
Cost
Cost: 250 A shares @ $72 = $18,000
Valuation before the split
250 A shares @ €70 = $17,500
Valuation after the split
250 A shares @ $55 | $13,750|78%
125 B shares @ | $3,750|22%
Total | $17,500|100%
So I would apportion the $18,000 cost as follows:
A - 78% - €14,040 or $56 per share
B - 22% - $3,960 or $31 per share
You should do a very clear note to yourself as to how you arrive at the cost of B and the resulting cost of A.
I find that after a few years, when I go to sell something like this, it takes me ages to figure out the calculations I used. So now, I spell it clearly.
Cost
Cost: 250 A shares @ $72 = $18,000
Valuation before the split
250 A shares @ €70 = $17,500
Valuation after the split
125 B shares @ | $3,750|22%
Total | $17,500|100%
So I would apportion the $18,000 cost as follows:
A - 78% - €14,040 or $56 per share
B - 22% - $3,960 or $31 per share
You should do a very clear note to yourself as to how you arrive at the cost of B and the resulting cost of A.
I find that after a few years, when I go to sell something like this, it takes me ages to figure out the calculations I used. So now, I spell it clearly.