In June 2010, Sunoco made the strategic decision to spin-off SunCoke Energy as a separate, publicly-traded company. SunCoke Energy’s cokemaking business is separate and distinct from Sunoco’s transportation fuels business with different business models, different customers and no significant integration or synergies. As a separate company, SunCoke Energy will be better able to focus on its world-class steelmaking customers, directly access the financial markets and pursue its global growth strategies.

This separation occurred in two steps:

• An initial public offering of approximately 20% of SunCoke Energy’s common stock was completed on July 21, 2011.
• A pro-rata, tax-free distribution of all of the remaining shares of SunCoke Energy’s common stock owned by Sunoco in the form of a special stock dividend to Sunoco shareholders was completed on January 17, 2012. Sunoco shareholders received 0.53046456 shares of SunCoke Energy’s common stock for every one share of Sunoco’s common stock held as of the January 5, 2012 record date. Sunoco will deliver cash in lieu of any fractional share of SunCoke Energy’s common stock.

Please read the information statement distributed by Sunoco on or about January 9, 2012 for more information about this transaction

Sunoco’s distribution of SunCoke shares to U.S. shareholders is generally considered a tax-free distribution.  No gain or loss will be recognized by (and no amount will be included in income) in connection with this distribution, except with respect to any cash in lieu of fractional shares of SunCoke common stock paid.  However, shareholders need to allocate their tax basis in Sunoco common stock between Sunoco and SunCoke on a basis relative to the fair market value of both companies at the time of the distribution.  Please see the question below.

You are strongly advised to consult your own tax advisor as to the specific tax consequences to you of the distribution in light of your particular circumstances.  Please see the information statement for additional information about the U.S. Federal Income Tax Consequences of the distribution. 

Your original tax basis in Sunoco common stock will be allocated between Sunoco and SunCoke on a basis relative to the fair market value of both companies at the time of the distribution.  Sunoco has completed IRS Form 8937, which contains the official information on this allocation.  This form indicates that based on the stock price of SunCoke and Sunoco on the January 17, 2012 distribution date, this allocation is as follows:

Closing Stock Price on January 17, 2012:

• Sunoco, Inc. (NYSE: SUN):                    $42.31
• SunCoke Energy, Inc. (NYSE:  SXC): $13.40
• Distribution Ratio:                    0.53 shares of SXC for every one share of SUN

Step 1:  Calculate value of SXC stock distributed per share of SUN held.

0.53 x $13.40 = $7.10 » Value of SXC stock received per share of SUN

Step 2:  Calculate the value above as a percentage of SUN’s market price on the January 17, 2012 distribution date:

$7.10 ÷ $42.31 = 16.8% » Percent of original tax basis allocable to SXC shares
83.2% » Percent of original tax basis retained by SUN shares

You are strongly advised to consult your own tax advisor as to the specific tax consequences to you of the distribution in light of your particular circumstances.