Taxable Spinoff

AAA

DEFINITION of 'Taxable Spinoff'

A divestiture of a subsidiary or division by a publicly traded company, which will be subject to capital gains taxation. The subsidiary will become completely independent from the parent corporation, operating entirely on its own. To qualify as a taxable transaction, the parent corporation must divest through direct sale of the division, or the assets it contains. The profits made from the sale will be taxed as capital gains.

INVESTOPEDIA EXPLAINS 'Taxable Spinoff'

A taxable spinoff will bring in liquid assets to the company, usually in the form of cash. The downside of this transaction comes from the decrease in income from the capital gains tax. If a parent company wishes to avoid a taxation, they may consider a tax-free spin off. By distributing new shares for the division or prorating new stock to current owners, the company will be able to avoid any capital gains from divestiture.

RELATED TERMS
  1. Divestiture

    The disposal of a business unit through sale, exchange, closure, ...
  2. Parent Company

    A company that controls other companies by owning an influential ...
  3. Scrip

    1. A written document that acknowledges a debt. 2. A temporary ...
  4. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  5. Spinoff

    The creation of an independent company through the sale or distribution ...
  6. Capital Gains Tax

    A type of tax levied on capital gains incurred by individuals ...
Related Articles
  1. Cashing In On Corporate Restructuring
    Bonds & Fixed Income

    Cashing In On Corporate Restructuring

  2. Use Breakup Value To Find Undervalued ...
    Investing

    Use Breakup Value To Find Undervalued ...

  3. The Basics Of Mergers And Acquisitions
    Options & Futures

    The Basics Of Mergers And Acquisitions

  4. Discover Master Limited Partnerships
    Retirement

    Discover Master Limited Partnerships

comments powered by Disqus
Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  3. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  4. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center