Spin-Off ages after completed


J

John

I finally got a handle and the time to understand spin-offs.
Unfortunately since the few stock spin-offs I've had, my stock has
moved to three other brokers. I go back to the original transaction
which I just entered as a zero cost stock purchase. Created a new
spin-off entry for the stock and name it something different as
Quicken won't allow a spin-off on an existing stock in Quicken. I
then rename the stock to the original one and it moves over. I then
delete the original zero dollar stock purchase. OK, well I look at
the three migrations to new brokers and none of them reflect the
change. So if the stock had a cost basis of 19,000 and after the
spin-off it was 18,000, the transfers still show $19,000. I then have
to modify the per-share cost and say it's for the cost basis. I need
to do that on each movement. Is this normal? Seems to be a mess.

JR
 
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T

Tom Young

I finally got a handle and the time to understand spin-offs.
Unfortunately since the few stock spin-offs I've had, my stock has
moved to three other brokers. I go back to the original transaction
which I just entered as a zero cost stock purchase. Created a new
spin-off entry for the stock and name it something different as
Quicken won't allow a spin-off on an existing stock in Quicken. I
then rename the stock to the original one and it moves over. I then
delete the original zero dollar stock purchase. OK, well I look at
the three migrations to new brokers and none of them reflect the
change. So if the stock had a cost basis of 19,000 and after the
spin-off it was 18,000, the transfers still show $19,000. I then have
to modify the per-share cost and say it's for the cost basis. I need
to do that on each movement. Is this normal? Seems to be a mess.

JR
Sorry, this write-up is hard to follow. You probably should re-post
with more of a step-by-step description of what you did "way back
when" and what you're doing now. Maybe just describe the process and
results for *one* of the spin-offs.

When you say "I go back to the original transaction which I just
entered as a zero cost stock purchase" are you talking about the
spin-off itself? So, if you had 100 shares of Company A and they
spun-off 10 shares of Company B you recorded a purchase of 10 shares
of Company B at a $0 per share price?

I'm also lost when you say "I then rename the stock to the original
one and it moves over." Are you saying that *Quicken* somehow
automatically transfer stock from one account to another just because
you renamed the spun-off stock on your new entry? That doesn't make
sense to me. If you've gone back and "correctly" entered the
spin-off, using a new name for the spun-off stock (e.g., Company A
spins-off 10 shares of Company C) renaming the Company C stock to
"Company B" should result in you having 10 shares of Company B in the
account irrespective of entries you may have made in the past to move
Company B stock from one account to the other.

Depending on how many transactions you've made in these stocks it
might be easiest to just delete your original funky entries for
spin-offs and any subsequent transfers of stock (not clear if you're
talking about transfers of parent company stock, spun-off stock, or
both) and make your new correct entries for the spin-offs and
subsequent transfers.

The general process of accounting for spin-offs is fairly easy: basis
in the original stock is split between the new company and the
original company based on the relative (market) values of the stocks
right after the split. So, if your original basis in your 100 shares
of Company A was $5,000 and right after the split the values of the
stock were:

Company A 100 sh @ $61/sh = $6,100 (95.8%)
Company B 10 sh @ $27/sh = $ 270 ( 4.2%)
------
Total $6,370 (100%)
======

Then 95.8% of the $5,000 basis would be allocated to Company A with
the remainder being allocated to Company B.

Tom Young
 

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