ABSTRACT FROM THE CORNERSTONE JSFB. SUBSCRIBERS CAN READ THE FULL ARTICLE IN THE JUNE 2014 EDITION.
Time Warner Inc. completed the spin-off of Time Inc. earlier this month. Likewise, CBS Corp. announced that it would split off its remaining shares in CBS Outdoor Americas Inc. It’s clear that tax-free spin-offs continue to be popular transactions for media giants and other companies to divide themselves up in a tax-efficient method. But these transactions are complex, and numerous tax rules come into play in both the transaction and the after effects on shareholders. There are variants, including split-offs and split-ups, and complex versions, such as reverse-Morris Trust spin-offs and cash-rich split-offs. A full explanation, even if possible, would take volumes. But we can provide a high-level overview of the major issues involved in spin-offs.
Janet Pegg, CPA, is the Head of Accounting & Valuation at Cornerstone Capital Inc. and former Managing Director and Analyst of U.S. Accounting Research at UBS Investment Bank. Janet is an II-ranked Analyst.