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Micro Focus ("Seattle SpinCo") stock issues
This page includes details and spreadsheets to calculate potential tax liability using your HPE cost basis before the spinoff.
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Advice and reference info from members. (Updated 7AM February 24, 2018.) Questions or comments to: firstname.lastname@example.org
If you were formerly a regular, direct employee of Hewlett-Packard, HP Inc, or Hewlett Packard Enterprise – or have a defined retirement or termination date – join the HP Alumni Association. No charge, thanks to HPAA members. This topic is covered in the HPAA's US Finance Forum, where members discuss US personal finance issues -- such as Social Security and stock -- from an ex-HP perspective.
An HPAA team is in the process of updating this page and the spreadsheets. Please check back on Monday evening, February 26.
Micro Focus "Seattle SpinCo" US tax liability on 2017 return. US HPE shareholders received American Depositary Receipts in a UK company -- Micro Focus International -- in the Sept. 1, 2017 spinoff of Hewlett Packard Enterprise Software (HPES), and may have realized gains that they must recognize and report on their 2017 tax returns -- even if the MFGP stock has not been sold. (An ADR is a negotiable certificate issued by a US bank representing a specified number of shares in a foreign stock.)
"...U.S. shareholders will be required to recognize gain (but not loss) on the exchange of their Seattle Class A common stock for Micro Focus ADSs. In addition, if you received cash in lieu of fractional shares, you may recognize taxable gain or loss..." HPE Tax Information for Shareholders Detailed explanation: Bloomberg Tax News
Members report that brokerages show the disposed shares as from the temporary company "Seattle SpinCo" (along with many cash-in-lieu-of-fractional-shares transactions.)
You should receive a 1099-B from your broker or the entity holding your shares, and it will show "proceeds" reflecting the fair market value (FMV) of the Seattle SpinCo shares on Sept. 1, 2017. If they have correct cost basis values for your HPE stock lots and accurately track it, they will show only those lots with a gain, which are the ones to report on your taxes.
If the MFGP basis in any shares or lots is GREATER than the opening day FMV, you have a loss, but that is NOT recognized for tax purposes. It does NOT offset gains in other Seattle SpinCo/MFGP lots. The higher-than-FMV basis is carried forward until you sell the MFGP.
For those lots with reportable gain, the MFGP basis is stepped up to the opening day FMV. (HPE's letter uses $29.34, the average Sept. 1 MFGP open and close.)
A team of HPAA members has developed a Micro Focus US Tax Spreadsheet (v04) to calculate potential tax liability using the number of shares in each lot and your HPE cost basis values -- formatted to match IRS 1040 Schedule D and Form 8949.
Alternatively, you may prefer HPAA's HP-Related Stock Basis Spreadsheet which covers other issues in addition to the Micro Focus tax issue -- but calculates tax liability on a per-share basis, rather than per-lot. Covers Hewlett-Packard Company, HP Inc, Hewlett Packard Enterprise, Agilent, Keysight, DXC Technology, and Micro Focus ("Seattle SpinCo") -- including the Micro Focus US tax liability issue -- on a per-share basis. One spreadsheet is preloaded with official HP FMV information from 1959 through November 2017. The other spreadsheets start with your cost basis for either HPQ shares acquired after 11/1/2000 or HPE shares acquired after 10/21/2015. Reference example for the HP-Related Stock Basis Spreadsheet, by Tom von Alten. (Revised February 4, 2018.)
Member tips: (To help other folks, please post your tips on the HPAA Finance Forum.)
- TurboTax lets you import information from most brokers. See TurboTax Import Partner list.
Micro Focus stock and options issues for former and current employees:
- US tax issue. The HPE announcement says "The transaction is expected to be tax-free to HPE." (emphasis added.) However, the transaction did create a US taxable capital gain for HPE shareholders. Discussed on the HPAA Finance Forum.
Official HPE presentation to HPE employees (undated
0.5MB pdf file) which covers:
- Unexpired HPE options. We don't have data yet. (However, people who were transitioned to DXC found that the HPE options in their Merrill Lynch account vanished but were converted to DXC options in a new Fidelity account.)
Cost basis - Micro Focus Form 8937
Micro Focus Tax Documentation
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Disclaimer. The information contained in this web site, or sites linked to it, is provided as a service to the community, and does not constitute financial, legal, or personal advice. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained in or linked to this web site and associated sites. As financial, legal, and personal advice must be tailored to the specific circumstances of each case, and finances and laws are constantly changing, nothing provided here should be used as a substitute for the personal advice of competent financial, legal, and personal advisors.
For more mutual help on this topic and many others, join the independent HP Alumni Association. If you were formerly a regular, direct employee of Hewlett-Packard, HP Inc, or Hewlett Packard Enterprise -- or have a defined retirement or termination date, join the HPAA. No charge, thanks to HPAA members.
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