Real estate investment trust, Newcastle Investment Corp (NYSE:NCT) completed the spin-off of New Media Investment Group Inc (NYSE:NEWM) by distributing shares of its common stock to Newcastle's common stockholders as of the spin-off record date (record holders) on 6 February 2014.
The company mentioned that for US federal income tax purposes, it will report its distribution of shares of New Media common stock (the distributed shares) as a taxable distribution equal to the fair market value of the distributed shares received in the distribution that will be USD12.30 per share. Also, this amount will be record holders' adjusted tax basis in each distributed share.
Additionally, the company's distributions together with cash dividends and stock distributions in any year, are treated as taxable dividends to the extent of its current and accumulated earnings and profits (E&P) for that year, for US federal income tax purposes. The distributed shares are considered a stock distribution of USD0.89 per Newcastle share, which is calculated by multiplying the fair market value of USD12.30 per New Media share by the spin-off conversion ratio of 0.07219481485.
Finally, the taxability of the stock distribution of the distributed shares will be decided in the context of all of Newcastle's 2014 E&P and distributions, which will not be known until early 2015.
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