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Ok, here is a little more information and what I think I should report for taxes.

The $23.15 was for 0.809 shares of Spectra which would imply a per share price of 28.62 (which looks about right given what Spectra closed at in January).

I first purchased a $500 block of Duke shares on March 31, 2005 (17.8169 shares for $28.0632 per share).

So using the 58.11 and 41.89 % figures recommended by Duke, the basis for that block would be:

$290.55 New Duke Energy Tax Basis
$209.45 Spectra Energy Tax Basis

The spinoff distribution was 0.5 meaning the 17.8169 shares would generate 8.90845 shares of Spectra. So, the Spectra Energy Tax Basis (per share) would be:
209.45/8.90845=$23.51.


Since I received a check for 0.809 shares, the fractional share basis would be $23.51*0.809 or $19.02.

So, in sum, I would report to the IRS:

Date acquired: March 31, 2005
Cost Basis: $19.02
Date sold: January 2, 2008
Sale Proceeds: $23.15

Capital gain would be $4.13

Does this seem like the right approach?


I think that looks right, but I am bugged by the missing fractional share:
.90845 share versus .809 share of SE
The difference is less than $3 but look and see if they turned that into a fractional DUK share. If so it'll add to your basis and reduce your future taxable gain on DUK.


More important, I still hold Duke and Spectra stock (I do Drip the Duke stock). Will this calculation (which is first in first out) lock me into a particular method for determining the basis when I eventually sell my Duke and Spectra stock in the future (i.e., will the IRS say that since I used the first in first out method, I have to use that when I sell my main holdings later?)

The first in first out method is always default but you can instruct your broker (before the sale) to sell from a particular lot etc. What I've read is you need their written confirmation (email is maybe? ok) and then you can assume you get the IRS's assent that you sold the ones you specified (you have proof of your intention). Brokers may tell you that they don't (they probably can't) tell which shares are which, but the process seems like it keeps things orderly and mostly satisfies everyone. I have never done this.

If there is any difference between what I tell you and what irasmilo posts I defer now and in advance to his superior knowledge and experience.

Thank-you, Ira, for correcting me when (I think) I read too much use of an average basis into the Duke pdf.
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