Stock Spin-off Cost Basis for Schedule FA (RSU Holders)
6 min read · Published July 2026 · Applies to AY 2025-26 and AY 2026-27
A spin-off is different from an acquisition or merger. Your employer's stock isn't disappearing into someone else's — instead, the company distributes shares of a newly independent subsidiary to existing shareholders, pro rata, while the original company keeps trading. If you held vested RSU shares through the spin-off, your broker statement shows a confusing new position appearing in your account with, often, no cost basis attached — and unlike a sale, there's usually no Gain & Loss report entry to explain it, because nothing was sold.
Spin-off vs. merger — not the same thing
| Spin-off | Merger / acquisition | |
|---|---|---|
| What happens to the parent | Continues to exist and trade | Disappears into the acquirer |
| What you receive | New shares of the spun-off company, pro rata — no cash, no sale | Cash and/or shares of the acquirer, in exchange for your old shares |
| Taxable event at the corporate action? | No — it's a distribution, not a sale | Yes, conservatively treated as a disposal (see the merger guide) |
| What happens to cost basis | Original basis is split between parent and spinco | New shares typically get a fresh FMV-based basis |
If your broker statement shows 100% of your old shares disappearing on the same date new shares appeared, and a G&L entry for the disposal, that's a merger, not a spin-off — see the merger guide instead. This page covers the case where you still hold your original company's shares and a new position in the spun-off company appeared alongside them.
Step 1 — no tax event at the distribution itself
Receiving spin-off shares is not a sale. You paid nothing and received no cash — it's a pro-rata distribution of new shares. There is no capital gain or loss to report, and no proceeds, at the point the spinco shares land in your account. Tax only becomes relevant later, when you actually sell either the parent's shares or the spinco's shares.
Step 2 — splitting your cost basis
Because nothing was sold, your original cost basis doesn't disappear or reset to zero — it gets allocated between the parent shares you still hold and the new spinco shares, using the relative fair-market-value method: compare the FMV of your parent holding and your new spinco holding on (or shortly after) the distribution date, and split your original total cost basis in that same ratio.
- Best source: US public companies are required to publish the exact allocation percentage for a tax-free spin-off, commonly filed as IRS Form 8937 ("Report of Organizational Actions Affecting Basis of Securities") on the spinco's or parent's investor-relations page. This gives you an exact, company-stated ratio rather than one you compute yourself.
- If unavailable: compute it yourself using each stock's closing price on the distribution date (or the first trading day after, if the parent hasn't gone "ex-distribution" yet on the exact date).
Rohan holds 100 vested shares of Company A, acquired at vest 3 years ago at a cost basis of $40/share ($4,000 total). Company A spins off Company B: shareholders receive 1 B share for every 4 A shares held, so Rohan receives 25 B shares. On the distribution date, A trades at $45 and B trades at $15.
FMV of A holding: 100 × $45 = $4,500
FMV of B holding: 25 × $15 = $375
Total FMV: $4,500 + $375 = $4,875
A's share of basis: ($4,500 ÷ $4,875) × $4,000 = $3,692 (≈ $36.92/share)
B's share of basis: ($375 ÷ $4,875) × $4,000 = $308 (≈ $12.32/share)
Rohan's total original $4,000 cost basis is now split — $3,692 stays with his 100 A shares (for a future sale of A), and $308 is the cost basis for his 25 new B shares.
Step 3 — what goes in Schedule FA
| Holding | Table A3 treatment |
|---|---|
| Parent (A) shares | Existing row continues as normal — initial value is not restated. It stays at the original vest-date value already reported in prior years; only peak and Dec 31 closing values are recomputed for the current year, same as any other held lot. |
| Spinco (B) shares | A new row this year: initial value = the allocated basis portion (e.g. $308 above), converted to INR at the SBI TTBR on the distribution date. Acquisition date = the distribution date. |
The FMV-based basis allocation matters for a future Schedule CG computation when you eventually sell A or B shares — it does not retroactively change what was already reported for the parent lot in a prior year's Schedule FA.
What to pull from your broker statement — and where else to look
Check your broker statement or transaction confirmation from the distribution date first — some brokers do include the allocation ratio there, even when it's absent from the standard Gain & Loss export (which typically only lists sold lots, and a spin-off isn't a sale). If it isn't there:
- Search the spinco's or parent's investor-relations page for a "cost basis" or "tax basis information" notice — usually published within a few months of the spin-off, often as IRS Form 8937.
- If neither exists yet, ask your broker's stock-plan support desk directly — they can usually pull the allocation ratio internally even when it isn't part of the standard downloadable report.
Enter the spinco shares as a fresh lot with the allocated cost basis as initial value and the distribution date as acquisition date — your existing parent-company lot needs no changes. ITRFA.in computes the INR values at the correct SBI TTBR.
Open the Schedule FA tool →Related guides
- Company merger/acquisition — cash-plus-stock, unvested rollover
- RSU Schedule FA — vested, unvested, acquisition date
- Table A2 vs A3 — what goes where