Cost Basis

U.S. FEDERAL INCOME TAX INFORMATION FOR THE DUN & BRADSTREET CORPORATION SHAREHOLDERS

July 8, 1998

Dear Dun & Bradstreet Corporation Shareholder:

In Summary
On June 30, 1998, The Dun & Bradstreet Corporation executed a tax-free spin-off distribution, which resulted in two public companies trading on the New York Stock Exchange: The Dun & Bradstreet Corporation (renamed R.H. Donnelley Corporation) with stock symbol RHD (referred to herein as "Old D&B (RHD)") and The New Dun & Bradstreet Corporation (renamed The Dun & Bradstreet Corporation) with stock symbol DNB (referred to herein as "DNB"). Pursuant to the spin-off, you received one share of common stock in DNB for each share of common stock in Old D&B (RHD) you held on June 17, 1998 (the "Record Date"). As a result, for each share of Old D&B (RHD) common stock you held on the Record Date, you now hold one share of Old D&B (RHD) common stock and one share of DNB common stock. U.S. federal income tax law requires that you allocate your pre-distribution tax basis in your Old D&B (RHD) shares between such shares and the DNB shares you received in the distribution. As described in detail below, 8.86% of your pre-distribution tax basis should be allocated to your Old D&B (RHD) shares and 91.14% should be allocated to your DNB shares.

U.S. Federal Income Tax Information
This letter contains certain U.S. federal income tax information relating to the distribution of all of the shares of DNB from Old D&B (RHD). In particular, this letter contains information concerning:

  • the U.S. federal income tax implications of the distribution of DNB from Old D&B (RHD);

     

  • calculating your U.S. federal income tax basis in your Old D&B (RHD) shares and your DNB shares; and

     

  • determining your holding period in your DNB shares.
Also included is:
  • a shareholder statement to be filed with your U.S. federal income tax return; and

     

  • a worksheet for calculating your U.S. federal income tax basis.
Tax Implications
Old D&B (RHD) obtained a ruling from the Internal Revenue Service ("IRS") stating that Old D&B (RHD) shareholders will incur no U.S. federal income tax liability due to the distribution of DNB stock. However, the IRS requires that each taxpayer who received this tax-free distribution attach to their U.S. federal income tax return for the tax period including June 30, 1998 (the "Distribution Date"), a statement containing the details of the transaction. To assist you in complying with this requirement, a shareholder statement is enclosed which you can complete and attach to your U.S. federal income tax return for the period including June 30, 1998. For those shareholders who are calendar year taxpayers, the enclosed statement should be attached to your U.S. federal income tax return for 1998.

U.S. Federal Income Tax Basis
The IRS has ruled for U.S. federal income tax purposes that you will not recognize any gain or loss when you receive DNB shares due to the spin-off. However, as in any sale of stock, you must recognize any gain or loss you realize if you subsequently sell shares of Old D&B (RHD) or DNB. To determine your gain or loss from the sale of Old D&B (RHD) or DNB stock, you will need to know your tax basis. Enclosed is a worksheet which illustrates how to allocate the tax basis in the Old D&B (RHD) shares you held on the Record Date between your Old D&B (RHD) shares and the DNB shares distributed with respect to such shares.

To allocate the tax basis in the Old D&B (RHD) shares you held on the Record Date you will need:

  • the number of shares of Old D&B (RHD) you held on the Record Date, and

     

  • the tax basis of those shares.
Generally, the tax basis of Old D&B (RHD) stock you purchased is equal to the price you paid plus any commissions or other fees you paid. If you received any of your shares by gift, bequest or through a merger, reorganization, stock split or similar corporate transaction, special rules apply for purposes of determining the tax basis of your shares which are beyond the scope of this letter. Please consult your tax advisor for additional guidance with respect to the determination of the tax basis of your Old D&B (RHD) shares.

You received one share of DNB stock for every share of Old D&B (RHD) you owned on the Record Date. U.S. federal income tax law requires that you allocate the tax basis of the Old D&B (RHD) shares you owned on the Record Date between (i) those shares and (ii) the DNB shares received in the distribution. This allocation depends on the ratio of the fair market values of the Old D&B (RHD) and DNB shares on the Distribution Date.

The enclosed tax basis worksheet explains this calculation and includes a sample allocation of tax basis between Old D&B (RHD) and DNB shares. The percentages of tax basis to be allocated to shares of Old D&B (RHD) and DNB are based on the average of the high and low sale prices per share for the Distribution Date. Based on such prices, 8.86% of your pre-distribution tax basis should be allocated to your Old D&B (RHD) shares and 91.14% should be allocated to your DNB shares. If your Old D&B (RHD) shares were acquired at different times in separate lots, it would be appropriate to apportion your stock basis by applying these percentages to your basis for each lot.

Holding Period
The ruling obtained from the IRS by Old D&B (RHD) addressed the appropriate manner to calculate the holding period of your DNB shares if you held your Old D&B (RHD) shares as a capital asset on the Distribution Date. To determine your holding period, the ruling provides that you add (i) the period you hold the DNB shares from the Distribution Date until you sell them plus (ii) the previous period during which you held the Old D&B (RHD) shares with respect to which you received the distribution of DNB shares. For example, after receiving the DNB shares, assume you hold such DNB shares for three months after the Distribution Date before disposing of that DNB stock. If you held the Old D&B (RHD) shares which entitled you to receive the DNB shares for ten months prior to the spin-off, you will be treated as having held the DNB shares for a total of thirteen months before the disposition.

The information regarding the U.S federal income tax consequences of the spin-off presented in this letter is for general reference only and does not purport to cover all U.S. federal income tax consequences that may apply to all categories of shareholders. All shareholders should consult their own tax advisors regarding the particular federal, foreign, state and local tax consequences of the spin-off to them.

 

R.H. DONNELLEY CORPORATION
THE DUN & BRADSTREET CORPORATION

U.S. FEDERAL INCOME TAX BASIS WORKSHEET
 
  Shareholder
Worksheet
Hypothetical
Example
1. Number of Old D&B (RHD) shares held   100
2. Copy line 1. Number of DNB shares you were entitled to receive   100
3. Tax basis of pre-spin Old D&B (RHD) shares $ $      2600
4. Percentage of the tax basis allocated to your post-spin Old D&B (RHD) shares 8.86% 8.86%
5. Percentage of the tax basis allocated to your DNB shares 91.14% 91.14%
6. Line 3 multiplied by line 4. This is the new tax basis of your post-spin Old D&B (RHD) shares. $ $   230.36
7. Divide line 6 by line 1. This is the new tax basis per share of your post-spin Old D&B (RHD) shares. $ $       2.30
8. Line 3 multiplied by line 5. This is the new tax basis of the DNB shares which were distributed to you. $ $ 2369.64
9. Divide line 8 by line 2. This is the tax basis per share of your DNB shares. $ $     23.70

SHAREHOLDER STATEMENT
PURSUANT TO TREASURY REGULATION §1.355-5(b)

Statement of shareholder receiving a distribution of stock in The New Dun & Bradstreet Corporation (a controlled corporation) pursuant to Treasury Regulation §1.355-5(b).
  1. The undersigned, a shareholder owning shares in The Dun & Bradstreet Corporation as of June 17, 1998 received a distribution of stock in a controlled corporation pursuant to Section 355 of the Internal Revenue Code.

     

  2. The names and addresses of the corporations involved are as follows:
    1. R.H. Donnelley Corporation
      (formerly The Dun & Bradstreet Corporation) ("Parent")
      One Manhattanville Road
      Purchase, NY 10577

       

    2. The Dun & Bradstreet Corporation
      (formerly The New Dun & Bradstreet Corporation) ("Controlled")
      One Diamond Hill Road
      Murray Hill, NJ 07974

     

  3. The undersigned surrendered no stock or securities in Parent in connection with the distribution.

     

  4. The undersigned received                  shares of Controlled in the distribution constituting only common shares in such corporation.

     

  5. By letter dated April 9, 1998, the Internal Revenue Service ruled that the distribution by Parent of shares of Controlled was a nontaxable Section 355 corporate separation.

                                  
Shareholder's Signature

                                                           
Spouse's Signature (if stock held jointly)

ATTACH TO YOUR U.S. FEDERAL INCOME TAX RETURN
FOR THE TAX PERIOD INCLUDING JUNE 30, 1998.

 

© 2000 Dun & Bradstreet, Inc. and Direct Report Corporation