We were awarded 574 shares of a company through a spin-off transaction. One year after the award, we sold 300 shares. What are tax implications on this sale?

[robtm]

If the stock was sold exactly one year from when you received it, it is a long-term capital gain or loss. Any time less than that it is a short-term gain or loss.

[PattiF · Accepted solution]

You would need to find the cost basis of the shares that were sold. You can check online for information from the original and spin-off company to see if there is any guidance for the valuation of the new stock. 

A company's stock price after completing a spinoff depends on whether any of the spun-off entity was retained. In a complete spinoff, the stock price of the company right before the spinoff should theoretically be equal to the sum of its post-spinoff stock price plus the initial stock price of the spun-off company. Spin-offs are reflected on your brokerage statement, and each broker has different formats.

@michelridgeway 

[michelridgeway]

Thank you. This is for 2023 taxes and of course rates may change but I am sure the method of calculation will be the same.  

[DianeW777]

Yes, the method will be the same.  To be clear on the difference between long and short term holding periods see the rules below.

• Long term is a holding period of more than one year and receives capital gain tax treatment (0%, 10%, 15%, 20% depending on your regular rate of tax)
• Short term is a holding period of one year or less and receives ordinary gain tax treatment (your regular rate)

@michelridgeway 

[michelridgeway]

Thank you. We made the sale 367 days after the spin-off transaction and plan to claim it as long term capital gains.