Time Warner is moving ahead with a plan announced in 2008 to divide its media-content and distribution businesses. It will spin off, on a pro rata basis, its roughly 90% stake in Time Warner Cable (TWC) to Time Warner shareholders. But first, Time Warner Cable will give those holders a huge special dividend: $9.25 billion, or $10.27 a share (the payment and record dates haven't yet been set). Time Warner, as the holder of the cable unit's Class B stock, will receive the bulk of the payout. Robert Willens, whose online Willens Report surveys the latest developments in taxation and accounting, says that Time Warner Cable estimates that 30% to 35% of the special distribution will be taxable as a dividend. The balance will be a return of capital, and be applied against and reduce dollar-for-dollar the basis (cost) of an investor's stock. If the return of capital exceeds the cost, the excess will be a capital gain, for which the IRS has crafted new rules. According to Willens, the new rules say "the portion of a distribution which is not a dividend shall be applied pro rata on a share-for-share basis to reduce the cost of each share of stock held by an investor within the class of stock on which the distribution is made." So recipients of a return-of-capital distribution must take the gain on their low-basis blocks of stock, even if the basis of their higher-cost shares hasn't been fully recovered. Willens says that may not be an issue with Time Warner Cable, however, because its stock "has always traded above the portion of the distribution that is likely to be a return of capital." Time Warner's pending reverse stock split is intended to boost its share price after it decouples from Time Warner Cable.

Stock-market bellwether General Electric (GE) Friday slashed its quarterly common dividend 68%, to 10 cents a share from 31 cents, for an annual savings of $9 billion.

Should companies consider reverse stock splits in these tumultuous times? Yes, says Adele Hogan, a partner in the global law firm of White & Case: "Reverse stock splits are a win-win for shareholders and companies, particularly when paired with a reduction in authorized capital. A reverse stock split gives companies a mechanism for retaining investor confidence and for weathering market downturns." A reverse split reduces the number of shares outstanding and boosts the per-share price. Historically, it may have been viewed negatively, since it could be used to make a stock look more valuable even if nothing else had changed. Time Warner (TWX), Sirius XM Radio (SIRI) and newspaper-publisher Lee Enterprises (LEE) all have reverse stock splits in the works.

Should companies consider reverse stock splits in these tumultuous times? Yes, says Adele Hogan, a partner in the global law firm of White & Case: "Reverse stock splits are a win-win for shareholders and companies, particularly when paired with a reduction in authorized capital. A reverse stock split gives companies a mechanism for retaining investor confidence and for weathering market downturns." A reverse split reduces the number of shares outstanding and boosts the per-share price. Historically, it may have been viewed negatively, since it could be used to make a stock look more valuable even if nothing else had changed. Time Warner (TWX), Sirius XM Radio (SIRI) and newspaper-publisher Lee Enterprises (LEE) all have reverse stock splits in the works.

Should companies consider reverse stock splits in these tumultuous times? Yes, says Adele Hogan, a partner in the global law firm of White & Case: "Reverse stock splits are a win-win for shareholders and companies, particularly when paired with a reduction in authorized capital. A reverse stock split gives companies a mechanism for retaining investor confidence and for weathering market downturns." A reverse split reduces the number of shares outstanding and boosts the per-share price. Historically, it may have been viewed negatively, since it could be used to make a stock look more valuable even if nothing else had changed. Time Warner (TWX), Sirius XM Radio (SIRI) and newspaper-publisher Lee Enterprises (LEE) all have reverse stock splits in the works.