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Corporate Spinoff QW2017

q_lurker
q_lurker SuperUser ✭✭✭✭✭
edited November 2018 in Investing (Windows)
Through another discussion (https://getsatisfaction.com/quickencommunity/topics/how-to-handle-csc-and-hpe-merger-to-form-dxc) I have now found that FINALLY Quicken seems to have listened to users and fixed the Corporate Spinoff action.  Thank you.  

For many years, perhaps from its inception, the Corporate Spinoff action in Quicken for Windows has generated backdated RtrnCap and Buy Shares transactions to cover a situation where one company spinoffs off shares of a second company.  Those two backdated transactions would be inserted back in time when the lot was originally acquired.  The RtrnCap took basis value from the original lot adding cash to the account, then the Buy Shares used that cash to buy shares of the spinoff.  

That procedure had the effect of then showing that the user owned shares of the spinoff at a time the spinoff did not exist and the user did not own any shares.  Investment performance was altered.  Historical net worth was wrong.  It became a wholly inaccurate representation.  

For years, I have told users not to use the Corporate Spinoff action because of that misrepresentation.  I have advised instead that they use Remove Shares and Add Shares transactions dated currently (actual time of spinoff) to accomplish the same net effect without buggering up their prior financial representation.    

Now (QW2017 R6; I am not specifically sure when in the 2017 sequence this might have appeared), I find that Quicken has heeded the advice from me and others.  

image

The current (new) sequence does generate currently dated Remove Shares and Add Shares transactions for the non-taxable spinoffs.  My first take through this is that they got that part exactly right.  They have attempted to clarify the "Cost per ... share" prompts.  I would have chosen alternate language like "Fair market value per share immediately after the spin-off" which is also more in line with the attendant help information.    

The wizard does still require that the New Company be a really New Company (within your Quicken file).  That will be an occasional issue but likely prevents more issues than is causes.  Good Choice.  The Wizard does create the new security in Quicken for that new company, but no ticker is asked for, nor other "New Security" type questions appear.  (The same applied in the old procedure).  So, the user will need to go back to edit the security details to add in the ticker and make any other applicable adjustments.  

I also note that the action get applied in ALL accounts that currently (time of spinoff) hold that original security.  That is quite logical but may take some by surprise.      

There may be some other obscure circumstance to work around, but at this point I am exceptionally pleased with this change.  

The one problem created:  They took the tack of eliminating the "taxable" spinoff option.  There had been a check box to select that option and the consequence was that same RtrnCap and Buy Shares transactions would be entered, but they would not be backdated; they would be currently dated (time of spinoff).  Because the "Buy" was current, there was no need for a by-lot repetition of Buy transactions.  IMO, that particular process was adequate.

Taxable spinoffs are not common and are often individually unique.  That makes it tough for Quicken to model.  That being said, the basic model is likely still - Cash from original company is used to Buy Shares of new company.  The new sahres of the new company do not get treated as acquired when the original shares of the original company were acquired.  That "Cash from company" part could come as RtrnCap, Div, Interest (conceivably), or some other MiscInc, or combination.  But from that point, I see it definitively as a Buy Shares; not as an Add Shares which the new Quicken form suggests.

As a result of this change, the following article should be edited with respect to the Taxable Spinoff section:
https://www.quicken.com/support/how-do-i-record-corporate-spin-new-securities   

Thanks, Quicken, Inc. for a significant improvement / bug fix / upgrade / correction / etc. requested by your users.  

Comments

  • Unknown
    Unknown Member
    edited November 2018
    Glad to see some progress, but the issue of adjusting the shares in all accounts causes problems.  If you have Stock A in two different accounts with two different costs per share, this new transaction seems to adjust all your accounts using the same cost per share.  They should just let you spin off shares in each account one at a time.  After all, when balancing brokerage accounts, you do them one at the time.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited July 2017
    Race944t said:

    Glad to see some progress, but the issue of adjusting the shares in all accounts causes problems.  If you have Stock A in two different accounts with two different costs per share, this new transaction seems to adjust all your accounts using the same cost per share.  They should just let you spin off shares in each account one at a time.  After all, when balancing brokerage accounts, you do them one at the time.

    @Bill Clark:  That is odd.  I had not tried that yet.  Are these shares of a mutual fund that you have setup as using average cost for the basis?
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited May 2018
    I think until Quicken fixes the bug where RtrnCap has the potential to mess up your basis information I'll probably continue to use the tried and true Remove/Add process.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited July 2017
    Tom Young said:

    I think until Quicken fixes the bug where RtrnCap has the potential to mess up your basis information I'll probably continue to use the tried and true Remove/Add process.

    Remove/Add is what the new process is in QW2017.  RtrnCap is no longer in the scheme.  
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited July 2017
    Tom Young said:

    I think until Quicken fixes the bug where RtrnCap has the potential to mess up your basis information I'll probably continue to use the tried and true Remove/Add process.

    You're right.  For some reason I missed that.
  • Unknown
    Unknown Member
    edited August 2017
    Race944t said:

    Glad to see some progress, but the issue of adjusting the shares in all accounts causes problems.  If you have Stock A in two different accounts with two different costs per share, this new transaction seems to adjust all your accounts using the same cost per share.  They should just let you spin off shares in each account one at a time.  After all, when balancing brokerage accounts, you do them one at the time.

    No they are individual securities of the same company but held in different accounts.
  • Unknown
    Unknown Member
    edited November 2018
    Race944t said:

    Glad to see some progress, but the issue of adjusting the shares in all accounts causes problems.  If you have Stock A in two different accounts with two different costs per share, this new transaction seems to adjust all your accounts using the same cost per share.  They should just let you spin off shares in each account one at a time.  After all, when balancing brokerage accounts, you do them one at the time.

    I have a similar issue but within the same account: two lots of the same security with different acquired dates and cost bases. So do I still have to use the Remove/Add method to preserve the holding period/tax basis for each lot? That would then be one Remove and 4 Adds on the spin-off date. Or would the improved wizard work in this case across both lots producing the 5 correct transactions automatically?
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited November 2018
    Race944t said:

    Glad to see some progress, but the issue of adjusting the shares in all accounts causes problems.  If you have Stock A in two different accounts with two different costs per share, this new transaction seems to adjust all your accounts using the same cost per share.  They should just let you spin off shares in each account one at a time.  After all, when balancing brokerage accounts, you do them one at the time.

    First, I apologize for dropping the ball with Race944t.

    This issue appears to be a misunderstanding on the Corp Spinoff prompts.  When Quicken is asking for the 'costs' what it is really seeking are the prices immediately after the spinoff.  Those two prices in conjunction with the share ratio are used to determine how the cost basis of every lot is allocated to the two securities.

    Suppose for simplicity after the spinoff old company was valued at $10/share and new company was valued at $5/share.  But you also only got 1/2 share of the new company for each share of the old company.  So if you had 100 shares of the old (x $10/share = $1000 value) you got 50 shares of the new (x $5 = $250); your post spinoff value is $1250.  The old company represents 80% of that value ($1000/$1250) and the new company 20%, so the basis splits 80/20.  

    That basis split applies to every individual lot - without regard to whether the lots are in the same account or separate account.  The unique basis of every lot is gets allocated by the same ratio that depends on the current values.  

    The Remove/Add pairing used by the new behavior of the Corporate Spinoff wizard will properly consider this.  Just be sure to use the prices for the two securities immediately after the spinoff.  The help info in Quicken reiterates this clarification.   
  • Unknown
    Unknown Member
    edited November 2018
    Race944t said:

    Glad to see some progress, but the issue of adjusting the shares in all accounts causes problems.  If you have Stock A in two different accounts with two different costs per share, this new transaction seems to adjust all your accounts using the same cost per share.  They should just let you spin off shares in each account one at a time.  After all, when balancing brokerage accounts, you do them one at the time.

    Yes, thanks for pointing all of this out. I actually had a spin-off entry to record for a 10/29 transaction date. To my surprise the Form 8937 was available today (it usually takes a few weeks)! This form not only provides the two prices you mention, but also the basis allocation percentages. So I tried the wizard method after my above posting. There was one glitch - the shares were allocated as 1 new for each 6 existing shares, or a .166667 entry in the wizard (it only permits a maximum of 6 decimals). So for my original 1200 shares, I kept getting 200.0004 new shares creating a "cash-in-lieu" scenario instead of the proper 200 shares. Fortunately, I was able to edit the new shares to the right number, but of course if you push on one field it pops out in another. So I had to redo the total cost field in the "Adds" in accordance with my usual spreadsheet method so there was no change in the aggregate cost bases for each lot. But I really appreciated having the wizard create all 5 required entries with all the right dates where I only had to edit a few numeric fields manually.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited November 2018
    Race944t said:

    Glad to see some progress, but the issue of adjusting the shares in all accounts causes problems.  If you have Stock A in two different accounts with two different costs per share, this new transaction seems to adjust all your accounts using the same cost per share.  They should just let you spin off shares in each account one at a time.  After all, when balancing brokerage accounts, you do them one at the time.

    but of course if you push on one field it pops out in another. So I had to redo the total cost field in the "Adds" in accordance with my usual spreadsheet method so there was no change in the aggregate cost bases for each lot. 
    If you are saying when you changed (corrected) the share quantity, Quicken wanted to no what other field to adjust (pops out?), the recommended path is to always let Quicken adjust the price/share.  That would have left the basis of that lot as it was.  The price/share is of no consequence.  Share quantity and cost basis for the entire lot are the critical values (as you seem to realize). 
  • Unknown
    Unknown Member
    edited November 2018
    Race944t said:

    Glad to see some progress, but the issue of adjusting the shares in all accounts causes problems.  If you have Stock A in two different accounts with two different costs per share, this new transaction seems to adjust all your accounts using the same cost per share.  They should just let you spin off shares in each account one at a time.  After all, when balancing brokerage accounts, you do them one at the time.

    Yes, I agree with you. I believe the basis figures were just off by a few dollars from my manual spreadsheet before and after the share change ... probably just due to rounding (I use the 8937 allocation %'s in the spreadsheet, rather than the prices). But for my records I wanted the Quicken figures to match the spreadsheet. In the end, everything worked out right.
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