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A company whose stock I hold spun off another company in 2006. The parent company announced that to figure out the cost basis of the new shares, shareholders should take the cost basis before the split, and allocate it to the two new holdings proportionately by fair market value.

Easy enough. The problem is that in this case, the new company didn't start trading until about 14 days after the spin-off -- the spin-off was on the 14th of the month, and the new company didn't start trading until the 28th. So no market value data is available until the 28th.

So which two fair market values should I use? It seems like I should use the same day, if possible, but if I choose the 28th, arguably the FMV of the parent company changed.

Maybe the question is how to calculate FMV of a security that doesn't trade, trades irregularly, or has a gap in trading.

The truth is that this won't make much of a difference in my taxes (the stock didn't move much during this 14 days), but I'd like to fall back on some kind of policy or rule rather than picking something arbitrarily, if possible.


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