Spin-Off

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Spin-Off

The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders.

When a spin-off occurs, the shareholders of the parent corporation are not required to surrender any of their parent corporation stock in exchange for the subsidiary's stock.

In the event that the distribution of stock to the parent corporation's shareholders amounts to a dividend, the distribution can be taxed pursuant to provisions of Income Tax statutes.

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References in periodicals archive ?
Warganegara, 2003, "Using Spinoffs to Reduce Capital Mis-Allocations," Review of Quantitative Finance and Accounting 20, 35-47.
The spinoff positions Travelers Property Casualty to participate independently in the accelerating consolidation of the insurance industry, especially after the events of Sept.
The data show $11 billion in spinoff activity in 1988, a level from which spinoffs declined precipitously into the early 1990s (along with other forms of dealmaking) and not surpassed again until 1993, when the current record-setting pace began in earnest.
All of the possible asset amounts have been used or considered for recent spinoffs.