Spinoff of Livent (LTHM) from FMC Corp (FMC)

FMC Corp spun off Livent effective March 1, 2019 in a transaction meant to be tax-free to its shareholders. The cost basis allocation information from IRS form 8937 was not available when these instructions were written. Cost basis allocation is based on the average of the opening and closing prices of FMC and LTHM on 3/1/2019.

This action is a simple spinoff transaction in the accounting software.  The information below is based on the average of the opening and closing prices of FMC and LTHM on 3/1/2019 using the IRS formula for cost basis allocation: value of parent after spinoff / total value of parent and daughter after spinoff.

 

The Spinoff Entry

Go to Transactions > Spinoff  or Accounting > Securities > Record spinoff of securities depending on the version of the software being used. If you are unfamiliar with spinoff transactions you can get help at this URL: https://www.iclub.com/support/kb/default.asp?page=normal_spinoff

Here is the information you need to complete the spinoff.

  • Date: 3/1/2019
  • Select Parent Security (or Parent Company) : FMC Corp (FMC)
  • Remaining Basis Percentage: 88.135
  • Cash received:  See your broker statement for cash-in-lieu received
  • Spinoff  Security (or Symbol of New Company) : Livent Corp (LTHM)
  • Shares received : 0.9353 x (# of FMC  shares owned)   (Remember to include fractional shares.)
    • For example, if you owned 100 FMC shares, you should receive 0.9353 x 100 = 93.53 LTHM shares.
  • Price Per Share : 12.95  (Average of open and close prices of LTHM on 3/1/2019)                     

Save the transaction and the spinoff has been entered.

 

NOTE:

The cost basis allocation is dependent on the prices used for both FMC Corp and Livent in the cost basis calculations. In our experience brokers tend to use the prices found in the guidance companies post on their websites including IRS form 8937. If your broker does not use that guidance, the cost basis of the companies involved as recorded in your accounting records and in your broker’s records will not match. This is not cause for concern. This is just due to the inexact nature of the tax code in this regard. Partnership tax returns have specific areas to reconcile these usually small differences. ICLUBcentral tax printer software automatically fills in these adjustments in the normal operation of the software using the data imported from your accounting records and that you enter from your 1099.