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Alberto-Culver spin-off help please

Alberto-Culver (ACV) did 2 things in one day. On 17 November they:

1) Gave shareholders a special $25/share dividend, and 2) Spun off their Sally Beauty Holdings (SBH) on a 1-for-1 basis to shareholders.

I'm trying to figure out how to put this into Quicken. Currently using Q Deluxe 2006. Ameritrade downloaded a bunch of dividend and removed shares and bought shares transactions and such and labelled them all "Reorganization ...", all of which are not correct (they effectively change my cost basis AND my purchase date). So I've deleted most of them. I've looked thru a bunch of old "spin-off" suggestions here in this newsgroup, but it seems that nobody's ever given a big dividend in addition to spin-off shares at the same time. This complicates matters a bit.

Per ACV's website, I am supposed to:

1) Delete the $25/share from my total cost basis (which is $44.36 on 1 February 2006). So I'm left with $44.36 - $25 = $19.36/share. 2) My ACV cost basis is now 73.26% of this. So $19.36 x .7326 = $14.18. 3) My SBH cost basis is 26.74%, so I'm now at $19.36 x .2674 = $5.18.

Doing steps 2 and 3 are easy in Quicken using the 'Corporate Spin-Off' option. However, somehow I have to first tell Quicken to lower my initial ACV cost basis by $25/share, and then do the spin-off calculations. Any thoughts?

Thanks in advance for the help. ws

Reply to
ws
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Return of Capital

Reply to
Eric Bloch

Treat the $25.00/share as non taxable Return of Capital. That lowers the cost basis for ACV. JPS

Reply to
jpsga

Thanks everyone for the help. Got it to work.

ws

Reply to
ws

Too bad the advice you were given was wrong.

The ACV spinoff is a very complicated transaction, the full impact of which won't be known until early 2008, yes, 2008.

The $25 dividend must be entered as a dividend from Sally Beauty as that is how it will be reported to the IRS in January 2007. However, sometime in late 2007 or early 2008, most, if not all, of that dividend will be reclassified as a return of capital. Some of this may even become a capital gain. It is unclear at this date how much of this reclassification will be a return of capital for ACV and how much for SBH.

If you sell any of your ACV or SBH shares before the final determination of the tax status of the $25 dividend, you won't know the cost basis of those shares.

Finally, the $25 dividend may be considered an "extraordinary" dividend under the tax code which will have additional implications on the tax consequences associated with the sale of any shares.

As if all of this weren't bad enough, it is certain that you will have to file amended tax returns for 2006 and perhaps even 2007 before this is all through.

Reply to
Ira Smilovitz

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