On March 12, 2009, Time Warner, Inc. (stock symbol TWX) issued spin-off shares in Time Warner Cable Inc. (stock symbol TWC). The spinoff ratio was .083670 shares of TWC for each share of TWX. The shares were held by an agent until March 27, 2009, when they were distributed to TWX owners.
The spin-off distribution was tax-free. Your former cost basis for TWX can be allocated as follows (based on relative market values at the opening of trading on 3/13/2009):
Time Warner Cable (TWC) 24.7829% Time Warner Inc (TWX) 75.2171% Total 100.0000%
Click on the spinoff calculator image to the right for an easy way to compute your cost basis allocation. Just choose TWC from the drop-down menu.
A complicating factor with this spinoff was the reverse split of 1 share for every 3 shares owned that occurred in both Time Warner Inc (TWX) and Time Warner Cable (TWC).
Holders of TWX are likely to receive TWO Cash in Lieu of fractional share payments, one for the fractional share of the TWC spinoff and one for any fractional shares from the reverse split.
The TWX reverse split occurred on March 27, 2009, which was AFTER the spinoff date. It is relatively easy to compute your new cost basis per share AFTER applying the cost basis allocation factors noted above.
The TWC reverse split occurred on March 12, 2009, which was PRIOR to the spinoff. It applies only to investors who already owned TWC before the spinoff.
Click on the Stock Split Calculator image to the right for an easy way to compute your new cost basis per share after the reverse splits. It will also calculate your gain or loss on the cash payment you will receive in lieu of fractional shares.
Stock Split Calculator for Cash in Lieu Payments
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Information provided is intended solely for U.S. individual cash-basis taxpayers and is believed to be accurate for most cases. Always consult your personal tax advisor about your own situation. Suggestions are most welcome. Please e-mail webmaster @ costbasis.com or write to us at P O Box 11022, Chicago IL 60611 with your comments.