Question
How is cost basis allocated for mergers and spin offs?
Answer
GainsKeeper uses security market values on the corporate action effective date (i.e. ex date for spin-offs) to allocate cost to new securities and to calculate gain/loss for taxable events. This is an industry standard and audit-accepted practice used to arrive at accurate and consistent calculations. Nevertheless, different organizations may use varying approaches. It is possible you may receive a slightly different calculation if your company mails you corporate action cost information. Both approaches are ultimately estimates acceptable to the IRS. IRS guidelines dictate that cost should be allocated based on fair market value on the distribution date. GainsKeeper has developed a proactive approach so that you can see your cost and gain/loss position, as well as work with your new securities without having to wait for a mailing to arrive from the company long after you need the information.