Here is my calculation for figuring out the cost basis. I am not guaranteeing that this is correct, however, from what I've read online, it seems right to me. Please let me know if any of you spot any errors. I hope this post is helpful.
The IRS lets you use the closing price, opening price, or volume-weighted-average price of the stocks -- on the first date where the new shares are trading excluding the spun off company. For the calculation below, I will use the closing prices that Yahoo historical prices lists on 5/1/2012
COP Closing Price on 5/1/2012 = 56.51
PSX Closing Price on 5/1/2012 = 32.76
Now, we must adjust for the fact that we have 2 COP shares for every PSX share. Let's calculate the denominator value for our percentage of the cost basis that will be attributed to each company:
(2 * COP) + (1 * PSX)
(2 * 56.51) + (1 * 32.76) = 145.78
Now, let's calculate how much of the 145.78 value is attributed to the COP shares:
COP = (2 * 56.51) / 145.78 = 77.5277816%
And, the calculation for how much of the 145.78 is attributed to the PSX shares:
PSX = (1 * 32.76) / 145.78 = 22.4722184%
So, before the spinoff, find out what your total cost basis was for all of your shares of the pre-spinoff COP, and let that value be 'B'. Then, the cost basis for COP and PSX is as follows:
COP Cost Basis = (B * .775277816)
PSX Cost Basis = (B * .224722184)
Hope this helps.
It is NOT correct assuming the closing prices are correct which seems to be as I recall. COP was 56.51 PLUS 1/2 a psx share 32.76 would be 16.38. SO 56.51 + 16.38 = 72.89 much simpler and correct.
FYI: For those of you who received PSX shares in the spinoff and who have those shares in a Scottrade account, then Scottrade has automatically calculated the cost basis of the PSX shares. I suspect that other brokerages have done something similar. You don't have to calculate the cost basis of your COP/PSX shares, it's already been done for you. You can check your Scottrade account for the basis, whether or not you sold your PSX shares already.
1. Login to Scottrade
2. Select "My Account"
3. Select "Gain/Loss & Tax Center" link in the left menu
4. Scroll over "Gain/Loss Reports"
a. If you have already sold your PSX select "Current Year
b. If you haven't sold your PSX select "Unrealized Gain Loss"
COP has issued its Form 8937, in which it reports the cost basis allocation as 77.09% for COP and 22.91% for PSX. See http://www.conocophillips.com/EN/investor/shareholder_services/Documents/Form%208937_Tax%20Basis_FINAL.pdf.
rantk81’s correct interpretation, calculation and result using closing prices apportioned the pre-distribution COP cost basis to the separate shares as: COP = 0.775277816 and PSX = 0.224722184.
Conoco, using average NYSE trading price on 5/1/12 calculates the apportionment as COP = 77.09% and PSX = 22.91%.
Both methods are acceptable, I think.
In other words, COP lost 22.47% of its per share value when it spun off Phillips. So, if there was no spin off, COP would have closed Friday at $66.30. Also, what do we now call ConocoPhillips? Are they gonna drop the Phillips in ConocoPhillips?
Your math is correct using 5/1/12 closing prices. COP has not issued their tax information statement yet and company guidance may differ if they choose to use average price. You can use the free spinoff calculator at www.costbasis.com to compute your own cost basis. The allocation factors have been added to the database.
If you are using Quicken to keep track of your securities, and you wish to enter the spin-off, here's how I did it:
After selecting your brokerage account and selecting "Transactions", go to the "Enter transaction" pull down menu and select "Corporate Securities Spin-Off". Enter the following:
transaction date 5/1/2012
Security name conoco philips (or COP or whatever you called that security)
New Company (you must create a name you've never used for a security before, I chose PSX)
Cost per old share: 56.61 *
Cost per new share 32.76 *
Don't select "This is a taxable spinoff" **
Then select Enter/Done, and Quicken will proceed to enter as many transactions as necessary for your various purchases of COP.
* You're supposed to use the official fair market value of the two shares. I can't find that posted on either COP's or PSX's website, so I'm using the 5/1/2012 closing prices, as did rantk81 in the first post on this thread
** I'm guessing this is a non-taxable spinoff, but that depends on how the company handled it, and again I could find no useful info on the COP or PSX website.
- Instructions above are for Quicken 2008. YMMV for other version.