Here is an example.
If you bought 11 shares of stock A for $110, your basis in that investment is $110.
Stock A spins off another corporate entity on the basis of 1 share of stock B for every 11 shares of stock A.
Now you have:
Stock A 11 shares $100.83 1/12 X $110 = $.083 X 11 shares
Stock B 1 share $9.17 1/12 X $110 = $.083 X 1 shares
12 shares $110
Your basis still remains $110 for the total investment.
The stock split is not a taxable event until the shares are sold. But you use the adjusted basis computed as above.
See this.
Why did MetLife spinoff Brighthouse?
In the short term, volatile trading is expected for Brighthouse as many MetLife shareholders sell their new shares because they won't be paying dividends. The actual conversion took place late Friday, when MetLife common shareholders received one share of Brighthouse common stock for 11 MetLife shares.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
