EV Energy Partners Chapter 11 Reorg into Harvest Oil & Gas

Mark251

I had/have 500 shares of EV Energy Partners (EVEPQ). They filed Chapter 11 Reorg and created Harvest OIl & Gas Corp. This process gave me 4 Shares of Harvest O&G (HRST) and 7 Warrants (HRSTW). How does one make this/these entries in QH&B 2017. 

q_lurker

I can't comment knowledgeably on bankruptcy-type restructures.  I don't know the ramifications of the change in value and basis - what current losses you might be able to claim.  I am not a tax pro, adviser, CPA, yada yada.  Do you won due diligence with qualified persons.    

I will comment on what might be applicable in Quicken.  This is based on the process applicable for spinoffs.  From a tax and accounting perspective it may not apply!

You received 4 shares HRST and 7 warrants HRSTW.  Those both had defined value at the time you received them (June, 2018).  Currently they seem to be values at about $23/share and $2/warrant.  That suggests the value you received was $92 in HRST shares and $14 in HRSTW warrants for a total value of $106.  The HRST shares are 87% (92/106) of that value.  The warrants are 13% (14/106).  The accepted procedure for those other types of cases would then be to assign 87% of your EVEPQ basis to the 4 HRST shares and 13% of the EVEPQ basis to the HRSTW warrants.  Do NOT take it from me that such is appropriate for a bankruptcy restructuring!

Those prices should be representative, but are not accurate.  You should get accurate values from some reliable source.    

For Quicken based on the above, you would then enter a Remove Shares of the EVEPQ holding, followed by an Add Shares transactions for 4 shares of HRST with a basis of 87% of the EVEPQ holding. Then enter a second Add Shares for the 7 warrants (shares) of HRSTW  with their share of the basis. 

It is also possible that, in Quicken, you wold sell the EVEPQ shares for the $106 and Buy the shares and warrants for their part of that value.  

Those two methods are different in how capital gains would be treated within Quicken.  I can't say whether one approach or the other is more suitable.

Good Luck.

Mark251

Thank you for your reply. 

If I do the buy and sell entries that would create the capital gains/loss issue this year.

If I do the add and remove entries that postpones the capital gains/loss issue until the time of the sell.

Is this what you mean about how the transactions would be treated in Quicken?             

This / these securities are in an IRA therefor capital gains is a non-issue I believe.

Once again thank you for your help.

q_lurker

Mark said:

Thank you for your reply. 

If I do the buy and sell entries that would create the capital gains/loss issue this year.

If I do the add and remove entries that postpones the capital gains/loss issue until the time of the sell.

Is this what you mean about how the transactions would be treated in Quicken?             

This / these securities are in an IRA therefor capital gains is a non-issue I believe.

Once again thank you for your help.

If I do the buy and sell entries that would create the capital gains/loss issue this year.

Likely a significant loss in a bankruptcy case, but yes.  You are basically interpreting my statements correctly.

I (fortunately) have not had an investment go through this type of process.  I believe in some bankruptcies, the shareholder gets a current year loss consideration, but don't quote me.  Does all the original basis transfer from the old holding to the new shares/warrants?  I don't know.  

Your final point re IRA probably makes it a moot point.  Do what makes sense to you.  No tax implications and I doubt there is a significant investment measurement issue.

For myself, I am anal enough about such details to want it 'right', even if it is an IRA and it doesn't make a difference.