As a result of the spin-off, how do I calculate the tax basis of my Peabody and Patriot Coal stock?
There are multiple ways to allocate your tax basis between your Peabody shares and your new Patriot shares. One such method is to determine the tax basis based on the fair value of both Peabody and Patriot stock as of the open of trading on November 1, 2007, the first day of “regular” way trading for Patriot. Using this basis and the ten Peabody shares to one Patriot distribution ratio, Peabody believes that 93.72% of your pre-distribution Federal income tax basis in your Peabody common stock would be allocated to your Peabody common stock and that 6.28% of such basis would be allocated to your Patriot common stock. For example, assume you originally purchased 1,000 shares of Peabody at $25.00 per share for $25,000 total.
