GE - WAB spinoff with cash for partial share

Jim_Harman

On 2/25/19 GE spun off its transportation business to Wabtec, producing .005371 share of Wabtec for each share of GE.

Everything looks OK entering the Spinoff transaction in QWin 2019, producing the same number of GE shares as I originally held but at a reduced cost basis, plus XX.70599 share of Wabtec.

In my brokerage account, I ended up with XX.0000 shares of Wabtec and $51.37 in cash. Should I record this in Quicken as a Sale of 0.70599 shares, producing a small capital gain, or should this cash in lieu of a partial share not be taxable?

q_lurker

The S-4 SEC filing amended sometime like 1/25/19 seems to support that taxable change.  https://www.sec.gov/Archives/edgar/data/943452/000114036119001550/s002443x10_s4a.htm (page 85).

So again, pending other info from GE and Wabtec, I think you have the right picture

• Div from GE @ $0.397239/GE share (0.005371 * 73.96)
• Buy (0.005371 * GE Share Quantity) shares of Wabtec for that whole dividend amount
• Sell any fractional share for whatever cash-in-lieu amount received.  (If your numbers are universal, you bought Wabtec for 73.96/sh and sold the fractional for 72.7631/sh netting a short-term loss of $1.1969/Wabtec share).  

mshiggins

I typically enter the cash-in-lieu transaction as a sell and consider the small capital gain as taxable. 

I have GE shares as well, so will be stepping through the spinoff transactions, too. Do you have a link to the spinoff info handy that you could share?

Jim_Harman

Update:

According to the Wabtec press release on this spin-off and also the costbasis.com calculator, the Wabtec shares should be considered a taxable dividend, so now I am even more confused as to how this transaction should be entered in Quicken. It appears that the GE cost basis should NOT be adjusted.

My guess on how to enter this is:
-- GE Div $YYY
-- Purchase XX.70599 shares of WAB @ $73.96 (price from costbasis.com)
-- Sell .70599 shares WAB for a total of $51.37 (72.7631/share)

-- short term loss is $0.85.

Do I have this right?

mshiggins

It sounds like GE structured the spinoff as a taxable event, but hard to say for sure without reading the spinoff documents. 

Jim_Harman

Note that the in-product QWin 2019 Help for a taxable spin-off would have you enter a Misc Income for the dollar value of the spin-off and an Add rather then Buy for the new shares.

It is not clear what category you should use for the MiscInc, and the Add would leave the cash in the account, so I don't think this is correct. 

The online help here
https://www.quicken.com/support/how-do-i-record-corporate-spin-new-securities
talks about a check box for taxable spin-offs, which is no longer in the product.since QWin 2017 R6.

So both Help entries on taxable spin-offs should be updated IMO.

q_lurker

I agree the in-product help is in error for the taxable spinoff.  Has been since process revisions were improved, but so few taxable spinoffs come up, the language has not been a problem so far (that I have seen).  

I am not seeing anything online yet that clarifies that this is a taxable spinoff.  

https://www.sec.gov/Archives/edgar/data/40545/000119312518172907/d591170d8k.htm does say "The transaction is expected to be tax-free to Wabtec’s and GE’s shareholders."

If a taxable event, I think you have a good picture.
If not a taxable event, I think the current wizard should be adequate if you can establish the right prices.  

Jim_Harman

This press release
https://globenewswire.com/news-release/2019/01/25/1705540/0/en/Wabtec-and-GE-Modify-Terms-of-Transaction-Expect-to-Close-By-End-of-February-2019.html
says it is taxable (see end of paragraph 3)

I suppose official information will be forthcoming. Treating it as a dividend would make some GE shareholders happy because of their recent dividend cut. Of course they would have to sell the WAB shares to get the cash.

q_lurker

The S-4 SEC filing amended sometime like 1/25/19 seems to support that taxable change.  https://www.sec.gov/Archives/edgar/data/943452/000114036119001550/s002443x10_s4a.htm (page 85).

So again, pending other info from GE and Wabtec, I think you have the right picture

• Div from GE @ $0.397239/GE share (0.005371 * 73.96)
• Buy (0.005371 * GE Share Quantity) shares of Wabtec for that whole dividend amount
• Sell any fractional share for whatever cash-in-lieu amount received.  (If your numbers are universal, you bought Wabtec for 73.96/sh and sold the fractional for 72.7631/sh netting a short-term loss of $1.1969/Wabtec share).  

mshiggins

I’m not sure Ameritrade is handling the action correctly.

I have 46 lots of GE and received 46 lots of WAB. The lot amounts of WAB match the lot amounts of GE times the 0.005371 conversion ratio. 

Then several of the “oldest” WAB shares whose sum matched the fractional share amount  were sold.  

I’m not sure why I would get 46 lots of WAB. Shouldn’t it have been just one lot of WAB?

Jim_Harman

@mshiggins, it sounds like Ameritrade is treating it as a non-taxable event, with each lot of WAB inheriting the purchase date and its share of the cost basis of your GE lots.

Vanguard definitely got it wrong. I only have one lot of GE and Vanguard does not know its cost basis. They Added one lot of WAB with a zero cost basis then sent an otherwise blank transaction (which probably would have turned into a Deposit if I had accepted it) for the cash from the fractional share.  

mshiggins

@Jim_Harman to complicate matters, Ameritrade is showing all the WAB lots with an acquisition date of 2/26/2019. 

I sent them them an email inquiring on why they took this approach. 

Roger Park

I give up!  I'm trying to record the spin-off of Wabtec from GE (using the corporate spin-off transaction) but I continue to get errors.  I'm looking for someone to tell me how!

Roger Park

I did review the discussion but it didn't help!  I end up with 27 million+ shares of Wabtec which obviously isn't correct!  I am using Quicken 2017 which I assume has not changed on that transaction from Quicken 2019.

Sherlock

If you reviewed the discussion, you should understand the correct way to handle the transaction is not confirmed yet.  I suggest you bookmark the discussion so that you may be notified when the discussion is updated.

Rick Milton

I received the following email from GE Investor Relations.  I don't know exactly what they are saying, but I think this has to be entered as a dividend (non-stock?).

They said:

"GE will not be filing Form 8937 because the transaction has no impact on the tax basis in GE shares. The inclusion of the per share dividend amount in income establishes the shareowner’s cost basis in Wabtec shares going forward. Historic cost basis in GE shares is unchanged and irrelevant to determining the basis of Wabtec shares going forward."

So, with this -- how do I enter it?

q_lurker

@Rick Milton:  Based on that response from GE (no change in cost basis of existing shares), I would say the guidance above is still correct.

Enter in Quicken as receiving a cash dividend from GE, buying shares of Wabtec, and then selling any fractional share of Wabtec for cash-in-lieu received to bring that to the integer number of shares actually received.  

@Roger Park : If you would like to share the number of GE shares held and the cash-in-lieu amount credited to you, I (or someone) might be able to lay out specific transactions for you to enter.  

Tom Young

@Rick Milton:

Here's the step by step, (having eliminated everything that was downloaded to you):

1.  Multiply your number of GE shares on 2/25/19 by 0.005371.  That's the number of WABTEC shares you received.
2. Multiply the number of WABTEC shares received by $73.96.
   
3. Enter that resulting dollar amount as a dividend from GE on 2/25/19
   
4. Buy the number of shares of WABTEC per step 1 at a per share price of $73.96.  That should wipe out the cash received in the dividend.
5. Divide the Cash in Lieu by the fractional number of shares received as determined in step 1.  That's your selling price.
6. Sell the fractional share by the per share selling price determined by Step 5. That should result in cash in your account in the amount of the CIL.
   

Greg_the_Geek

Do you know why I would receive .395 shares on 3/1/19 after receiving 18 on 2/25/19? So far I still have 18.395 shares in my Vanguard brokerage account.

mshiggins

Greg_the_Geek said:

Do you know why I would receive .395 shares on 3/1/19 after receiving 18 on 2/25/19? So far I still have 18.395 shares in my Vanguard brokerage account.

Greg, which security are you referring to - GE or WAB?

Greg_the_Geek

WAB shares.

Rick Milton

@Tom Young

Thanks so much for this step-by-step process.  It is much appreciated!

Rick

Jim_Harman

@Greg_the_Geek,

You probably should have received a dividend from GE which was used to purchase 18.395 WAB, then they should have sold the .395 to generate the cash for the partial share, then used the cash to buy the settlement fund (Federal Money Market)

If you follow @Tom Young 's instructions above you should end up with the correct transactions in Quicken, and hopefully that will eventually match Vanguard's records. I ended up deleting the transactions Vanguard downloaded for this spin-off.

For me, Vanguard's website shows

2/25 - Integer number of WAB shares added (no cash involved)
3/1 - Cash added for partial share
3/5 - Fed MM purchased for the 3/1 cash

There is still no mention of the Dividend from GE or the acquisition or sale of the partial share.  The WAB is showing a cost basis of $78.06 per share, which is also incorrect IMO.

Greg_the_Geek

I just checked my Vanguard and it's still showing 18.395 shares of WAB. What is the per share cost basis for the partial share? Is it the same ($73.96) as the shares added on 2/25/19?

Jim_Harman

Greg_the_Geek said:

I just checked my Vanguard and it's still showing 18.395 shares of WAB. What is the per share cost basis for the partial share? Is it the same ($73.96) as the shares added on 2/25/19?

I believe it should be the same.

C Phil

@Tom Young  Thanks for posting the step-by-step process above.

I think you've flip-flopped the wording in step 5 which easily happens when we use words to describe calculations. 

Corrected, I think Step 5 should read:  Divide your Cash in Lieu by the fractional number of shares received as determined in step 1.  That's your selling price.  

Please review and edit your otherwise excellent post above.  

Tom Young

@C Phil:

You're right, I reversed the figures and corrected my original post.  Thank you.

mshiggins

I’ve had a series of email exchanges with the corporate actions team at Ameritrade. Disappointingly, they seem unwilling to take any action to get the incorrect tax treatment of the GE-WAB action corrected. 

tvicki

I have read everything here and see that $73.96 per share is used to record the buying of the Wabtec shares and that is the closing price on Feb 26, 2019. However  Schwab has used Feb 25, 2019 of $76.96 (actually $76.955) calculated with the High of $80.46 + Low of $73.45 = $153.91 and divide by 2 which = $76.955  I have not spoken yet to Schwab nor to my Investment advisor. How do I know which date 2/25 or 2/26 and if to use the Close or High & Low divided by 2?

Shane Bacon

Hi All, I don't have a quicken account but was reading the comments looking for direction also myself. I wrote to GE investor relations and received the below response, hope this is helpful

'The inclusion of the per share dividend amount in income, which is $78.06, establishes the shareowner’s cost basis in Wabtec shares going forward. Historic cost basis in GE shares is unchanged and irrelevant to determining the basis of Wabtec shares going forward. GE will not be filing Form 8937 because the transaction has no impact on the tax basis in GE shares'

Roger Park

q_Lurker,

I own 1,696.5214 shares of GE stock and received $8.20 Cash In Lieu from Webtec.  I still have not entered the transaction into Quicken.  Thanks for your help.

Roger

tvicki

I still have not spoken to Schwab nor my Investment Advisor however I see that Schwab has changed the cost basis to $78.06 for buying Wabtec shares which is the Close on 2/25/19 (instead of the average of the high & Low for that day). Will wait to see if it stays that way or if it changes again.