November 29, 2019 at 9:08 pm #4956
I’d be interested if anyone has looked into the GE Wabtec spinoff. There seems to be a lot of confusion on how the transaction will be taxed.
In February, GE shareholders received 0.005371 shares of Wabtec common stock for each share of GE. Fractional shares were paid in cash.
My brokerage shows the transaction as a stock-split. I received the cash from the fractional shares in February and recently sold the remaining whole shares. GE had been a long term holding. Under realized capital gains, my brokerage is showing the fractional share distribution as a short term capital loss, and the sale of the whole shares as a short term capital gain. There has been no adjustment to my cost basis in GE.
If those details are all correct, this does not appear to be a conventional spinoff. Another point of confusion is the information below stating that the spinoff will be taxable. It’s not clear if that means taxable to the shareholder or parent company.
“Under this modified structure, the spin-off will be considered a taxable dividend for U.S. federal income tax purposes.”
Thanks for any information.December 1, 2019 at 2:11 am #4961kaneoheParticipant
Can’t help you with this one but I had a similar thing with HPE going thru a complex transaction with part transforming for an instant into Seattle Spin Co and then into Micro Focus International
https://investors.microfocus.com › surface › disclaimer › ShowDisclaimer
sorry that link didn’t work for me but if you copy/paste it, a google page will come up with that article as one of those found.
It was a taxable transaction but both the whole shares of Spin Co that resulted and the fractional CIL share of Micro Focus International were reported on the 1099B as long term that reflected my long term holding of the original HPDQ which spun off HPE so it’s a bit surprising to see yours reported as ST instead.
December 1, 2019 at 7:00 pm #4965
- This reply was modified 2 years, 7 months ago by kaneohe.
Thanks for the help. I did find more information that raises additional questions.
“In some cases, spin-offs have a dual character. They can be tax-free at the shareholder level, but taxable at the distributing corporation level.”
“While GE has revised its deal with Wabtec, such that the spin-off will now be taxable at both the GE and GE shareholder levels, the PLR issued in connection with the original transaction provides a blueprint for structuring a “partially taxable” Morris Trust or “Reverse Morris Trust” transaction.”
Brokerage firms may not have all the details on this spinoff. Maybe this is a case where we will be told to consult a tax advisor. In any case, it will be interesting to see how everything is reported on the brokerage 1099 forms next year.
The statement that the spinoff would be a taxable dividend makes you wonder how that would be reported on 1099 forms. That could also have impacted the cost basis and holding period of the shares received. Note also that my brokerage firm has not changed my basis in GE.
Lots of interesting questions!May 29, 2020 at 1:40 pm #6696Lewis-HParticipant
Upon completion of the merger, GE shareholders are expected to collectively own approximately 24.3% of the outstanding shares of Wabtec common stock, and current Wabtec shareholders are expected to collectively own approximately 50.8%. GE will own Wabtec common stock and Wabtec non-voting convertible preferred stock, which together represent approximately a 24.9% economic interest in Wabtec.May 29, 2020 at 7:52 pm #6698
My brokerage 1099 did show the Wabtec distribution as a taxable dividend. The dividend was 100% qualified.
I was not overly surprised but there was no indication earlier that the dividend was taxable.
The fractional shares that were sold were reported and resulted in a small short term capital loss. Basis was reported to the IRS.
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