Supervalu Passes Tax Consequences Of Sav-A-Lot Spinoff To Investors

When SUPERVALU Inc (NYSE: SVU) first talked of a spinoff of the Sav-a-Lot division, investors were intended to receive 80 percent of spinoff while the company retained just 20 percent. Investopedia reports, however, that when the company filed an amendment to their Form 10 Registration Statement that, among other things, detailed a 60/40 split.

Not only did this reflect a grab of double the new company for Supervalu, it holds more serious consequences, according to Investopedia. A company can hold 20 percent of a spun-off entity and not trigger a tax event for their investors, but by doubling their stake in Sav-a-Lot, Supervalu guarantees investors will pay taxes on the spinoff.

Shareholders spun-off shares of Sav-a-Lot will be treated as a taxable dividend, but Supervalu - due to the structure of the deal and existing capital losses - will not end up paying taxes on their portion.

Supervalu stock is down 6 percent since the amended Form 10 was filed.