B share to A share exchange


K

Kevin

Dear NG:

Money 2004 Deluxe, Win XP Pro.

I've held B shares of one of my mutual funds for 6 years and they have been
automatically exchanged for A shares.

Has a method ever been developed in Money for exchanging/converting B shares
of a mutual fund to A shares.

There is a 1 cent difference in NAV's (A shares $4.28 - B shares $4.29) so I
will receive slightly more A shares than I had of B shares.

I'm considering entering a sell of B shares and a subsequent buy of A shares
to retain an accurate cost basis.

Any other thoughts or ideas would be appreciated.

Thanks,

Kevin
 
Ad

Advertisements

D

Dick Watson

I think the sell and buy to retain cost basis is the one thing you don't
want to do. It will set the cost basis for the "new" investment to the buy
price.

The general thinking on this kind of case seems to be that, assuming you
didn't hold both funds previously, the best thing is to do a split and then
rename/change the symbol in the investment details. The split would be 429
shares for each 428. Put a note in the investment comments describing the
transaction so that you have the history.
 
K

Kevin

Thanks Dick,

I see what you mean about the cost basis.

My problem is that I DID own both A and B shares and not all of the B shares
have converted to A's yet. So I still own both.

I'll need to ponder this one some more.

Thanks again.

Kevin
 
D

Dick Watson

I don't have a good answer for that case. Most everything I can think of has
some manner of side effect. Hopefully somebody will pop in with a decent
answer. I've had a FAQ answer in the wings for a long time waiting for a
good solution to this problem.
 
K

Kevin

Dick Watson:

I think what I might try is calculating the cost basis for the B shares that
have converted, then sell them, then buy them back as A shares for the same
cost. Disregarding the recent $4.29 conversion cost.

I'll post back and let you know how it worked out.

Thanks for you help.

Kevin
 
D

Dick Watson

Why didn't I think of that? That seems the most obvious way to do this. It
will probably screw up performance reporting--because the share price
recorded for this transaction will reflect no gains on the old investment
and tomorrow's quote will suddenly accrue them all--but that's probably the
least bad side effect. I think I'll go ahead and add a new FAQ for the
mutual fund merger with two cases: the Cal Learner solution for the case
where you didn't previously own both funds and the Kevin case for when you
did.

The FAQ that should make it into the online database Real Soon Now:
--
Q): How do I handle a mutual fund merger?

A): There are two methods that work. You can pick one depending on whether
you previously held both of the funds involved in the merger or not.

The technique suggested by Cal Learner for the case where you didn't hold
both funds previously:

- enter a split for the share ratio involved (you can use the NAVs at the
exchange times 100)
- go into the Investment Details and change the name and symbol
- record the event in the investment comments.

If you previously held both funds, there is no solution without side
effects. Kevin suggested what is probably the least bad solution:

- sell the retired fund for your exact cost basis
- buy the correct number of shares in the surviving fund for the total
amount of the old cost basis. Let Money figure the share price.

The side effect of this is that it will create a one-time unrealized capital
gain to match the entire gain you were carrying for the retired fund on the
date you set for the transaction. This will likely cause inaccurate
performance reporting and may propagate to things like long-term/short term
capital gains reporting.
 
Ad

Advertisements

C

Cal Learner-- MVP

If you previously held both funds, there is no solution without side
effects. Kevin suggested what is probably the least bad solution:

- sell the retired fund for your exact cost basis
- buy the correct number of shares in the surviving fund for the total
amount of the old cost basis. Let Money figure the share price.

The side effect of this is that it will create a one-time unrealized capital
gain to match the entire gain you were carrying for the retired fund on the
date you set for the transaction. This will likely cause inaccurate
performance reporting and may propagate to things like long-term/short term
capital gains reporting.
The problem with that is that the acquire date would be wrong. You
could enter the date to match the original buy if there were not too
many such buys. And while you were entering those dates, you could
void the corresponding original purchase to eliminate the one-time
unrealized capital gain problem.
 
K

Kevin

OK so let's regroup.

Selling the B shares at their original cost basis and buying A shares at
THAT
cost seems like it will be feasible.

The conversion of B shares to A shares carries along with it all shares
purchased with reinvested dividends.

Since in my case, all purchases/dividend reinvestments
were all well over 1 year ago makes them all long term.

So, using the original purchase date of the B shares
as the purchase date of the A shares should also be feasible.

Does that about cover it?

What a tangled web we weave.

Kevin
 
D

Dick Watson

Sound like it would work to me. Again, performance reporting will be
distorted. Happy weaving!
 
Ad

Advertisements


Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top