I own Duke Energy (DUK). They just had a spinoff of Spectra Energy (SE). I received 1 share of SE for every 2 shares of DUK. It seems logical but I want to know for sure, do I take my cost basis from DUK and now make 1/3 of that the cost basis for SE and 2/3 the cost basis for DUK?

Thanks Dan, I'm still at the novice level and only own Classic Plus as software. I track all my own purchase/sales totals in Excel spreadsheets I've created. I do have another question about DUK though and I notice they don't have a message board. I was curious why not. In 2006 the stock had really been improving and saw the price go from around 27 to over 34 in December. Is anyone out there following DUK? I was gettting very happy with it and now I get Spectra. For now I'll still hold on to DUK and see if they can start growing again and we'll see what Spectra brings.

No, that's not the way it works. Per information on the company website, 58.11% of the original cost basis stays with DUK. Spectra gets the remainder [you'll have to do some math, you know ] It may seem logical to take 1/3 of the basis when you have 1 share spun off for every 2 you owned, but you have to take the relative market values into consideration. Roughly, they take the market price of DUK times 2 and the market price of SE times 1, total them, and then take the percentage of the total amount you got for Duk to that total to get the 58.11%.

There are different, acceptable methods for using the market price. Some use opening, some Closing, and some take an avererage. The 58.11% that I gave you will stand up for tax purposes.

Now might be a good time to ask what you want to use this for. I gave you what you would need for taxes. Figuring return on investment is another thing entirely. For DUK, I would consider the shares of SE received times the opening market, as a distribution in their return. For SE, I would take the beginning market value for my beginning figure.

If that doesn't significantly muddy it up for you, come on back with any questions.

Rip West

Rip,

   Do you possibly know the cost basis for Mirant. Thanks

                  RYoung4457@aol.com

You have the right idea but the wrong fractions.  Got to the
Spectra energy website. on their Investor relations page you will see a
link about the spinoff from Duke. It explains what fractions to use to
reduce your cost basis in Duke and establish the basis in the new
Spectra stock.. I have had several of this type of spinoff and the
company always provides the fractions to use for determining the adjusted cost basis for the old and new shares.

Details on spinoffs for Club Accounting software can be found on our web site at http://www.iclub.com/sup...lt.asp?page=transactions

 

Here's the one you want:

01/02/2007 - Duke Energy Corporation [DUK] and Spectra Energy Corp [SE] - Normal spinoff

http://www.iclub.com/support/kb/default.asp?page=kb_1141

SPINOFF: Duke Energy [DUK] and Spectra Energy Corp [SE]

Issue:

On 1/2/2007, Duke Energy Corporation [DUK] distributed 0.5 shares of Spectra Energy Corp [SE] for each share of DUK owned in a regular spinoff.

Cause:

This is a normal spinoff.

Resolution:

Enter the spinoff transaction in accordance with the How to do a normal spinoff instructions

Here's the information you need for the spinoff:

1. Spinoff date - 1/2/2007
2. Parent company - Duke Energy Corporation [DUK]
3. Remaining basis percentage of Parent Company 58.11.
4. Number of shares held in parent company - provided by software.
5. There is one daughter company - Sectra Energy Corp [SE]
6. Number of shares of SE received - This will be the number of shares owned in DUK multiplied by 0.5 (make sure to include fractional shares).
7. Price per share of daughter company - $27.75.
8. Cash received in lieu of fractional shares - take from broker statement.