Submitted By: John
Answered: January 27, 2017 9:00 am

I recently received stock in a new corporation as a result of a spin-off from a public company. Am I taxed on this?

Usually, a spin-off does not result in any gain or loss to a shareholder. A portion of the basis of the old stock is allocated to the new stock in the spin-off company. The IRS usually gives a ruling to the parent company to confirm this tax treatment. Best bet: Check with the company’s office of shareholder relations, which you can usually find on the company’s website, to find out about the specifics of the spin-off that you were involved in.

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Tax Glossary

Adjusted gross income (AGI)

Gross income less allowable adjustments, such as IRA, alimony, and Keogh deductions. AGI determines whether various tax benefits are phased out, such as personal exemptions, itemized deductions, and the rental loss allowance and modified adjusted gross income (MAGI).

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