Usually, a spin-off does not result in any gain or loss to a shareholder. A portion of the basis of the old stock is allocated to the new stock in the spin-off company. The IRS usually gives a ruling to the parent company to confirm this tax treatment. Best bet: Check with the company’s office of shareholder relations, which you can usually find on the company’s website, to find out about the specifics of the spin-off that you were involved in.
The tax on the investment income in excess of $1,700 (may change after 2007) of a child under age 18, based on the parents’ marginal tax rate and computed on Form 8615.