Essay on Hsbtax Basis Information

2112 Words Mar 17th, 2013 9 Pages
U.S. Federal Income Tax Information relating to Sara Lee Corporation’s Distribution of DE US Inc/DEMB 1753 common stock on June 28, 2012 Updated 7/25

After the close of business on June 28, 2012, Sara Lee Corporation spun-off its international coffee and tea business through a stock dividend to Sara Lee shareholders. Several separate transactions occurred in connection with the spin-off:  First, Sara Lee distributed all of the common stock of DE US, Inc., the U.S. subsidiary that held Sara Lee’s international coffee and tea business (“CoffeeCo”), to an exchange agent on behalf of Sara Lee shareholders of record as of the record date (the “distribution”). The CoffeeCo shares were not physically delivered to you, but were held by the
…show more content…
U.S. Federal Income Tax Basis of the CoffeeCo Common Stock You Received The tax basis in the CoffeeCo common stock you received depends upon the tax basis you had in your Sara Lee common stock immediately before the distribution. In general, you must divide your Sara Lee common stock pre-distribution tax basis between the shares of Sara Lee and shares of CoffeeCo common stock you hold immediately after the distribution based on the relative fair market value (FMV) of each. We cannot tell you what your tax basis is in your Sara Lee common stock; you will need to determine your tax basis based on how and when you acquired your Sara Lee shares.

1

Example - assume that:   before the distribution, you owned 100.5 shares of Sara Lee common stock, for which you had tax basis of $12.00 per share, or $1,206.00 in total. immediately after the distribution, you hold 100.5 shares of Sara Lee common stock (before the reverse stock split is effective) with a FMV of $572.85 (assume $5.70 per share market price, pre reverse stock split) and 100.5 shares of CoffeeCo common stock, including the value of the $3.00 dividend, with a FMV of $1,286.40 (assume $12.80 per share market price, pre reverse stock split).

Your tax basis of $1,206.00 would remain the same, but you would divide that tax basis between the two sets of common stock. In

Related Documents