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The cost basis allocation has two primary pieces: the Key3Media (KME) stock
that was spun off to ZD shareholders, and the $2.50 cash dividend per ZD

The cost basis for the KME shares to a ZD shareholder is based on $6.00
closing price for KME shares on their first day of trading yesterday, 8/21.
Since 1/2 of a KME share was distributed for each ZD share, the cost basis
adjustment to the ZD share is $3.00; i.e. of your cost basis in ZD is
$10.00 per share, it is now adjusted to a $7.00 cost basis, and your cost
basis for KME is $6.00 per share (yesterday's closing price).

The majority of the $2.50 cash dividend is expected to be taxed at ordinary
income tax rates depending on the amount that is covered by ZD's earnings
and profits for fiscal year 2000. If ZD's "E&P" is less than $270 million
(the total dividend payout), then a part of the $2.50 cash dividend would
be a tax-free return of capital and would also reduce the ZD cost basis by
that amount. So, for example, if $2.00 of the cash dividend per ZD share
was taxable, then the extra $0.50 per share would be a tax-free return of
capital and the ZD cost basis of $7.00 (from the above example) would be
further reduced to $6.50 per ZD share. The tax impact will not be known
until the end of year 2000, and will be shown on your form 1099 in early

Please call Robert Borchert of Ziff-Davis at 212-503-3505 if you have
further questions.
The above post was copied and pasted from another
board. It helped answer some of my questions. Maybe
it will answer some of yours.

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