How are Spin-offs taxed?
Spinoffs can be taxed. A spinoff that can be taxed is a divestment by a corporation traded publicly, subject to taxation on capital gains. For transactions to be taxable, the parent company must divest through the selling of properties or division it owns directly. The capital gains made as profits will be taxed. A taxable spinoff brings in liquid assets in the form of cash to the company. A disadvantage of this transaction is the decrease in income acquired from the capital gains. To avoid taxation, a parent company may consider a tax-free spinoff.