Corporate acquisition problem



I tried doing a corporate acquisition and ran into a problem. The sceneario:

I have 100 shares of ABC Widget Fund. XYZ Widget Fund takes over ABC Widget
Fund and gives .654 shares of XYZ for each share of ABC. The price of each XYZ
share is $9.03

When I enter this I get this message: "No shares available for the acquired
security." What does this message mean? Is there anyplace I can go to look at
the meaning of the message and maybe give me a hint of what I am doing wrong?

Company acquired: ABC Widget

Acquiring company: XYZ Widget

New shares per held share: .654

Price per share: 9.03

Thanks for any help.




R. C. White

Hi, Jim.

In most cases, the price of the shares at the time of the acquisition is
immaterial. I don't know why Quicken continues to ask for it. Your "basis"
(actually "basis for determining gain or loss, or for depreciation"; usually
equals "cost") is the important number. This "basis" will be transferred
from your old (ABC) shares to your new (XYZ) shares.

"Funds", as opposed to other corporations, sometimes have weird quirks; only
the fund manager and its attorneys and accountants can guide you through
those quirks. Assuming that your funds transaction is treated like most
corporate acquisitions, the process is understandable - and recordable - if
you think it through, one step at a time. Assuming your "funds" followed
the normal pattern, it would work like this:

How much did your 100 shares of ABC cost you? Including any re-invested
dividends or other purchases after the original acquisition? And after
deducting for any prior sales of your ABC shares? Let's say your basis is
$1,000, or an average of $10 per share. You would be entitled to 65.4
shares of XYZ from the acquisition. In a typical corporate acquisition, you
would receive 65 whole shares of XYZ, plus a check for the cash value of the
..4 fractional share (.4 x $9.03 = $3.61, I suppose). You would record the
stock-for-stock acquisition in Quicken, showing the receipt of 65.4 shares
and transferring your $1,000 basis to them, giving you a basis of $15.29
($1,000 / 65.4) per share. You would then record the sale of .4 share; it
cost you $6.12 (.4 x $15.29) and you got only $3.61, so you have a capital
loss of $2.51. That capital loss would be short-term or long-term,
depending on how long you had held the ABC shares before the sale on the
acquisition date.

Mutual funds transactions are usually much more tedious to record. Not more
difficult, line by line, but more tedious because there usually are many
lots of stock, each acquired on a different date at a different cost.
Theoretically, each lot must be dealt with separately. The basis and
holding period of each lot of your new XYZ shares will depend on the basis
of the ABC lot for which you received the XYZ shares, and when you acquired
that lot. I hope that your situation is not like this. If you had ever
disposed of ABC shares in the past, you would have made an election at that
time to calculate your ABC bases by FIFO (first-in, first-out), LIFO or
average cost; that method would also be applied to the shares involved in
this XYZ acquisition.
When I enter this I get this message: "No shares available for the acquired
security." What does this message mean?
Quicken thinks you don't have 100 shares of ABC before the acquisition.
Maybe it thinks you have none, or maybe it thinks you have only 99.99999
shares, caused by some rounding error in the past. When you reinvest a
dividend, record the actual dollar-and-cents amount of the dividend (which
is known) and the number of new shares (rounded to 3 decimal places,
usually, which is also known). Let Q calculate the price per share, so that
any rounding error is in this transitory figure, leaving the total cost and
number of shares with no rounding fragments. For your ABC fund, go back and
check all your ABC transactions and make sure they were recorded this way in
Quicken. That should clear up those minuscule rounding errors that can show
up when you dispose of your final shares.


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