GE - WAB spinoff with cash for partial share

Jim_Harman
Jim_Harman SuperUser ✭✭✭✭✭
edited May 2019 in Investing (Windows)
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?
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  • mshiggins
    mshiggins SuperUser ✭✭✭✭✭
    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?
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  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    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?
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  • mshiggins
    mshiggins SuperUser ✭✭✭✭✭
    It sounds like GE structured the spinoff as a taxable event, but hard to say for sure without reading the spinoff documents. 
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  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    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.
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  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    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
    Jim_Harman SuperUser ✭✭✭✭✭
    edited March 2019
    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.
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  • mshiggins
    mshiggins SuperUser ✭✭✭✭✭
    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?
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  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    @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.  
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  • mshiggins
    mshiggins SuperUser ✭✭✭✭✭
    @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. 
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  • Roger Park
    Roger Park Member ✭✭
    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
    Roger Park Member ✭✭
    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
    Sherlock SuperUser ✭✭✭✭✭
    edited March 2019
    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
    Rick Milton Member ✭✭
    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
    q_lurker SuperUser ✭✭✭✭✭
    @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.  
  • Greg_the_Geek
    Greg_the_Geek SuperUser, Windows Beta ✭✭✭✭✭
    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.
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  • mshiggins
    mshiggins SuperUser ✭✭✭✭✭
    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?
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  • Greg_the_Geek
    Greg_the_Geek SuperUser, Windows Beta ✭✭✭✭✭
    WAB shares.
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  • Rick Milton
    Rick Milton Member ✭✭
    @Tom Young

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

    Rick
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    @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.
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  • Greg_the_Geek
    Greg_the_Geek SuperUser, Windows Beta ✭✭✭✭✭
    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?
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  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    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.
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  • C Phil
    C Phil Member
    edited March 2019
    @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
    Tom Young SuperUser ✭✭✭✭✭
    @C Phil:

    You're right, I reversed the figures and corrected my original post.  Thank you.
  • mshiggins
    mshiggins SuperUser ✭✭✭✭✭
    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. 
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  • tvicki
    tvicki Member ✭✭
    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?
  • 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
    Roger Park Member ✭✭
    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
    tvicki Member ✭✭
    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.
This discussion has been closed.