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What's the proper way in Quicken to account for the recent stock action for Hertz There was a rever

downtogether
downtogether Member
edited May 2018 in Investing (Windows)

Comments

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited May 2018

    Before finalizing numbers, I would wait for further information from the company (their Form 8937 submission) and/or your brokers information.  The primary point of interest is how your cost basis is allocated to the two entities.  


    Second, my understanding is that this is a tax free exchange and that if you started with 15 shares of Hertz Rental Car (Ticker HTZ) you came away with 1 share of Herc Holding (Ticker = HRI) and 3 shares or Hertz Global (Ticker = HTZ, but a different company than the prior Hertz Rental Car).


    The math:  To properly accomplish this task, you need to have the fair market value of the two company's shares immediately after the spinoff.  There are a variety of ways to establish that FMV which is why waiting for further information can be beneficial.  But the basic math is the same process.  Suppose you (and your broker and HTZ and HRI) decide that the opening values are a good FMV estimates.  Those values were 34.40 for HRI (1 share) and 44.50 per share for 3 shares of HTZ (the new one).  Total FMV of all shares is then 34.40 + 3 * 44.50 = 167.90.  The HTZ component is 133.50 for 79.5% of the total.  The HRI component is 34.40 for 20.5% of the total.  Thus, 79.5% of your original basis in Hertz Rental car should transfer to Hertz Global and 20.5% of that original basis would transfer to Herc Holding.  The basis allocation should be done on a lot-by-lot basis, if you bought shares of Hertz Rental Car at different times.  


    With those caveats and starting points, I would 
    1. Backup my file to assure a valid recovery point, if needed.
    2. Change the ticker for the original holding (Hertz Rental Car) to HTZ(old) copying the HTZ prices to the new ticker and deleting the old prices for HTZ.
    3. Create a new security Hertz Global with the ticker HTZ
    4. Create a new security Herc Holdings with the ticker HRI
    5. Enter a Remove Shares transactions dated 7/1/16 for all shares or Hertz Rental Car
    6. For each lot of Hertz Rental car you had owned, enter an Add Shares transaction the new Hertz Global - 1/5 as many shares as the original purchase of that lot, 79.5% (or as otherwise justified) of the original basis of that lot, and the original acquisition of that lot.
    7. For each lot of Hertz Rental car you had owned, enter an Add Shares transaction the new Herc Holding - 1/15 as many shares as the original purchase of that lot, 20.5% (or as otherwise justified) of the original basis of that lot, and the original acquisition of that lot.
    8. If at the end of that lot-by-lot set of additional Add Shares transactions, you end up with any fractional shares of Hertz Global or Herc Holdings, enter Sell shares transactions for those fractional shares for the cash-in-lieu amount you receive instead of receiving those fractional shares.  That is, you treat the fractional shares as received and them immediately sold.      
    That is the basics with the key being to be patient so that you do not have to redo work.  If your brokerage downloads bring in any different set of transactions, likely you should delete the downloaded versions.  
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited December 2016
    q.lurker said:


    Before finalizing numbers, I would wait for further information from the company (their Form 8937 submission) and/or your brokers information.  The primary point of interest is how your cost basis is allocated to the two entities.  


    Second, my understanding is that this is a tax free exchange and that if you started with 15 shares of Hertz Rental Car (Ticker HTZ) you came away with 1 share of Herc Holding (Ticker = HRI) and 3 shares or Hertz Global (Ticker = HTZ, but a different company than the prior Hertz Rental Car).


    The math:  To properly accomplish this task, you need to have the fair market value of the two company's shares immediately after the spinoff.  There are a variety of ways to establish that FMV which is why waiting for further information can be beneficial.  But the basic math is the same process.  Suppose you (and your broker and HTZ and HRI) decide that the opening values are a good FMV estimates.  Those values were 34.40 for HRI (1 share) and 44.50 per share for 3 shares of HTZ (the new one).  Total FMV of all shares is then 34.40 + 3 * 44.50 = 167.90.  The HTZ component is 133.50 for 79.5% of the total.  The HRI component is 34.40 for 20.5% of the total.  Thus, 79.5% of your original basis in Hertz Rental car should transfer to Hertz Global and 20.5% of that original basis would transfer to Herc Holding.  The basis allocation should be done on a lot-by-lot basis, if you bought shares of Hertz Rental Car at different times.  


    With those caveats and starting points, I would 


    1. Backup my file to assure a valid recovery point, if needed.
    2. Change the ticker for the original holding (Hertz Rental Car) to HTZ(old) copying the HTZ prices to the new ticker and deleting the old prices for HTZ.
    3. Create a new security Hertz Global with the ticker HTZ
    4. Create a new security Herc Holdings with the ticker HRI
    5. Enter a Remove Shares transactions dated 7/1/16 for all shares or Hertz Rental Car
    6. For each lot of Hertz Rental car you had owned, enter an Add Shares transaction the new Hertz Global - 1/5 as many shares as the original purchase of that lot, 79.5% (or as otherwise justified) of the original basis of that lot, and the original acquisition of that lot.
    7. For each lot of Hertz Rental car you had owned, enter an Add Shares transaction the new Herc Holding - 1/15 as many shares as the original purchase of that lot, 20.5% (or as otherwise justified) of the original basis of that lot, and the original acquisition of that lot.
    8. If at the end of that lot-by-lot set of additional Add Shares transactions, you end up with any fractional shares of Hertz Global or Herc Holdings, enter Sell shares transactions for those fractional shares for the cash-in-lieu amount you receive instead of receiving those fractional shares.  That is, you treat the fractional shares as received and them immediately sold.      
    That is the basics with the key being to be patient so that you do not have to redo work.  If your brokerage downloads bring in any different set of transactions, likely you should delete the downloaded versions.  
    The Hertz IRS Form 8937 for this transaction is currently available on this site:  http://ir.hertz.com/spin-transaction  Unfortunately, it does not provide any further details.  I did not notice anything contradictory to my prior comments above, though the form identifies using a hi/lo average price rather than the opening price I used.  
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