The cost basis ratio is .03941.
Example relating to calculation of tax basis for shares of Imation common stock received from the distribution:
Let's assume you purchased shares of 3M stock a number of years ago for a total cost of $1,500. Further assume that, after the effect of any stock splits, you held 100 shares of 3M prior to the spin-off. Thus, you would have received 10 shares of Imation stock from the 7/1/96 distribution. At that point, you incurred no tax liability, because the spin-off was ruled by the IRS to be a tax-free distribution. Using the tax basis of .03941 given in the attached letter (is coming to you in the mail) from 3M, dated 7/15/96 and entitled "Important Tax Information For 3M Spin-off," your tax basis in your Imation stock would be:
| |
Total Shares of 3M Stock |
100 |
| A |
Total Cost of 3M Shares |
$1,500.00 |
| B |
Tax Basis Ratio for Imation spin-off |
0.03941 |
| C |
Tax Cost Basis of Imation Shares |
$59.12 = A x B |
| D |
Tax Cost Basis of 3M Shares After Spin-off |
$1,440.89 = A-C |
If you sold your Imation shares for $30 per share, your capital gain would be:
| E |
Total Shares of Imation Stock |
10 |
| F |
Price per Share Sold |
$30.00 |
| G |
Proceeds from Sale |
$300.00 = E x F |
| H |
Tax Cost Basis (from C above) |
$59.12 |
| I |
Taxable Gain |
$240.89 = G-H |
If the shares that were sold were held for more than one year, the gain should be reported as a long-term capital gain. Anything less than one year is considered short-term. The holding period for shares distributed in a tax-free spin-off includes the holding period of the related stock from which the distribution was made. Thus, in this example, the holding period goes back to when you originally purchased your 3M stock, and would equate to a long-term capital gain of $290.89.
Using the actual historical cost basis, the amount and nature of your gain could be calculated as shown in the above example. You should consult with your personal tax advisor prior to filing your tax return.
