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Immediately prior to the spin-off, IAC effected a one-for-two reverse stock split. For every two shares of IAC common stock owned prior to August 9, 2005, shareholders received one share of IAC common stock (IAC) and one share of Expedia common stock (EXPE).

On August 9, 2005, 100% of Expedia was spun off to shareholders of record as of August 8, 2005, ending IAC's ownership of Expedia.

While we cannot tell you how to calculate your cost basis for the reasons discussed below in "How do I determine the cost basis of my IAC shares?", the following data points should assist you with your calculation.

IAC and Expedia began trading as independent public companies on August 9, 2005. The opening prices of both stocks were determined by the August 8, 2005 closing prices of Expedia common stock in the "when-issued" market ($22.50) and by the closing price IAC common stock ($25.30), with the latter adjusted for the 1-for-2 reverse stock split and spin-off of Expedia [($25.30*2)-$22.50 = $28.10]. The resulting split in value between IAC and EXPE shares was approximately 56% and 44%, respectively.

IAC's spin-off of Expedia, Inc. was generally treated as a non-taxable event in the United States for federal tax purposes to holders of IAC common stock. IAC did not pursue a determination of eligibility for tax status in Canada or any other jurisdiction outside of the United States. Accordingly, each non-U.S. shareholder should consult his or her tax advisor to seek non-taxable status on an individual basis. For more information about the tax consequences of the spin-off, see the IAC/Expedia proxy statement dated June 20, 2005 (filed 6/17/05).

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