Abbott Labs’ & AbbVie’s Spin-Off and Cost Basis

Abbott Laboratories (ABT) shareholders received one share of the new company, AbbVie (ABBV) for each share they owned of Abbott Labs (ABT).

AbbVie is a biopharmaceutical company, comprised of the former Abbott Labs’ drug unit and its leading product, Humira. ABBV stock will pay an annual dividend of $1.60 per share.

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The new Abbott Labs will be a science-based healthcare company, and will include all other company operations, including stents & medical devices, diagnostic equipment, baby food and generic drug businesses. ABT shareholders will receive a dividend of $0.56 per year.

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Here’s a link to the Abbott Labs’ Investor Relations website. Here’s a link to the actual cost basis information.

As excerpted from the Abbott.com website:

“Each Abbott Shareholder received one share of AbbVie common stock for every share of Abbott common stock held by such shareholder. Abbott Shareholders will also receive cash in lieu of any fractional share of AbbVie common stock resulting from the Distribution.

…[A]n Abbott Shareholder’s aggregate tax basis in his or her Abbott common shares would be allocated between the Abbott common shares and the shares of AbbVie common stock pursuant to the following allocation percentages:
1. 47.9751% to Abbott common shares (US$ 32.045 / (US$ 32.045 + US$ 34.75)).
2. 52.0249% to shares of AbbVie common stock (US$ 34.75 / (US$ 32.045 + US$ 34.75)).”

Here’s what you should do:

First print out the cost basis allocation information from the aforementioned website. Stick it in your investment file and/or scan it into your computer AND send a copy to your accountant. Tell the accountant to hold it in your tax file.

Do this now while it’s fresh in your mind. No accountant likes it when you tell him/her that there was a spin-off, it’s April 14, the spin-off took place 6.5 years ago, and they have to drop everything to research the cost basis allocation. Be polite and take care of it NOW.

Do the math to adjust your cost basis in your records OR ask a friend who’s good at math to do that for you. (The calculation is incredibly simple for “math people”. This will not be a burdensome request.)

That’s pretty much it. Your financial and accounting professionals can easily answer questions about cost basis and spin-offs.

Send other questions to research@goodfellowllc.com.

Happy investing!

Crista Huff

President

Goodfellow LLC

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