Calculate Cost Basis of Stock

Unknown

Ok, I have seen a lot of posts on this question but not sure they are correct for my issue.

I have an ESPP and i have all the purchase prices of the 845 shares that I own. 

In April of last year, the company switched to a new brokerage.  So in Quicken, I created a new brokerage account and did a transfer from one to the other.

Then, in November of 2015, the company split into 2 new companies.  From the brokerage firms download, there was a Sell of the 845 shares from the old company and a Bought of 845 shares to the new company at $0.

The company also gave 845 shares of the new company and listed from the brokerage at $0.

Now when I look at my investments in Quicken, I have a $0 Cost Basis for both stocks.  But on my account on the brokerage website, shows 2 different cost basis for the entire amount of each stock.

Any suggestions?

mshiggins

How to handle the spin off of one company into two will depend on how the spin off was structured tax wise. If you name the companies, we can provide specifics on how to handle the spin off for your ESPP shares.

mshiggins

Quicken Generic User said:

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Tom, I don't believe corporate spinoff will work with ESPP shares.

Unknown

Quicken Generic User said:

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You probably are right since I've never tried that, just assumed that all the actions worked in all the Accounts.

Howard Roark

Quicken Generic User said:

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So is the conclusion that calculating outside of Quicken, then entering the remove shares/add shares process WILL work for ESPP shares?

mshiggins

Quicken Generic User said:

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I would only use Add/Remove if it was a non-taxable spin off. For a fully taxable spin off, I would use Sell and Buy.

Unknown

Quicken Generic User said:

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I'd think it would work, at least for the purpose of correctly creating lots as of an appropriate date and with the basis expressed as the discounted price.  But the process would lose all the ESPP share-specific information like grant date, FMV at grant date, FMV at exercise and discount percentage.  So I've withdrawn my (hasty) answer.

I'd revise the process thusly:

Assuming the OP has access to all that ESPP stock-specific information through the broker and the actual purchase price by lot,  I'd probably do a Remove for all shares in the Account, starting with a clean slate.

I'd then do a Xin of cash.  The amount of cash would be the sum of all the lots' basis just prior to the split at their discounted amount with the offset being the same Account.

I'd then go through a series of Bought ESPP Shares actions, using the correct purchase dates, and the ESPP Wizard to establish the ESPP stock-specific information.  (I tried this using the "current" date as the date of the action but with the grant date, exercise date, etc. dated back in time, but a sale of this stock seemed to ignore those dates and simply calculate the compensation using the straight discount as of the date of exercise.)

Properly done that should bring the cash back to the cash in the Account immediately prior to the spin-off and get all the lots properly stated "as if" the 2 companies were in existence all along, similar to what the spin-off wizard does.  As long as you went back and zeroed out the Quote/Price as of the purchase date of the "new" stock there should not be any prior period balance sheet misstatements of market value and basis, overall.

mshiggins

Quicken Generic User said:

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Actually my best advice is if your company is involved in any corporate action - merger, sale, spin off - sell all your ESPPs, RSUs, and stock options BEFORE the merger.

Unknown

Quicken Generic User said:

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I'd guess that it is a non-taxable spin off since there was no "boot" involved and by now most people have received a 1099-B, if they are going to get one.

mshiggins

Quicken Generic User said:

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I would prefer not to guess.

Unknown

Hewlett-Packard, spun off to HP Inc. and Hewlett-Packard Enterprise.

Unknown

Quicken Generic User said:

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Thanks for all the suggestions.  I will look into it.  I have another question, but will make a new post on that.

mshiggins

Ah, spin off structured to be tax free. There is a lengthy discussion on the transaction here:

http://getsatisfaction.com/quickencommunity/topics/how-to-record-the-hewlett-packard-split