How to enter a spin-off to company that no longer exists in order to maintain cost basis?

sotob

I am new to Quicken and am entering transaction history for a stock.  I obtained the stock (call it company "A") through an ESPP in the 1980s.  In the 1990's company "A" spun off a new company "B".  Later, in the 2000s, company B was purchased by company "C".  So company "B" no longer exists.  When I try to add a "Corporate Securities Spin-Off" transaction for "B" from "A", I get a "No shares available for the acquired security" error.  This prevents me from maintaining the cost basis for company "A", and I can't find a way to adjust it manually.  Is there a way to do this?

Sherlock

It sounds like you did not use the correct wizard as no shares available for the acquired security should not apply to Corporate Securities Spin-Off but would apply to Corporate Acquisition (stock for stock).  I suggest you try to select Corporate Securities Spin-Off  again.

sotob

I appreciate your response, Sherlock, and tried again (as I have a number of times in the past week), but carefully making sure I used the correct wizard.  This yielded the same result.  I should add that Quicken support has told me that the spin-off can't be done if the company doesn't now exist, and gave me no work-around.  Assuming this is so (though hoping it's not), this is the reason I asked how I might manually adjust the cost basis of the original stock.

Sherlock

sotob said:

I appreciate your response, Sherlock, and tried again (as I have a number of times in the past week), but carefully making sure I used the correct wizard.  This yielded the same result.  I should add that Quicken support has told me that the spin-off can't be done if the company doesn't now exist, and gave me no work-around.  Assuming this is so (though hoping it's not), this is the reason I asked how I might manually adjust the cost basis of the original stock.

Quicken doesn't know whether a company exists or not.

We may certainly enter the same transactions as the wizard should: a Removed for the original security holdings and an Added for each lot to establish the new cost basis of the original security holding and the new security holdings with the original acquisition dates.

q_lurker

"No shares available for the acquired security"

The message is misleading (in error).  It is saying you do not have Company A in the account at that time so there is nothing to spin-off from.  (Based on my attempts to replicate your report).  Make sure you have shares of Company A in the account where you are entering the Corp Spinoff. 

"I should add that Quicken support has told me that the spin-off can't be done if the company doesn't now exist, and gave me no work-around. "

That is not so; they also mislead you.  I have no trouble spinning off a non-existent company through the Corporate Spinoff action.  

sotob

Thanks all for your helpful comments.  They helped point me to what I think is the root cause of the problem, but not yet sure how to fix it. 

The shares of the original Company A are ESPP shares.  When I enter the initial transactions for these to populate the account, Quicken adds *two* securities to my list:  "Company A" and "Company A ESPP".  When I try to spin off the new company, the only option available in the wizard for "Security Name" is "Company A", but I don't have any of those (yet ... later the stock splits).  As an experiment I tried to enter the original shares as non-ESPP and then was able to spin off the new company without a problem.

I can also now see how Quicken creates the transactions for this spin-off, so understand the "Removed" and "Added" suggestion.  I'm wondering if that is the way to deal with this, by doing that manually for the ESPP shares, instead of using the wizard.  I'll try it the next chance I have.

Also wondering if this could be considered a bug in the wizard.

Sherlock

sotob said:

Thanks all for your helpful comments.  They helped point me to what I think is the root cause of the problem, but not yet sure how to fix it. 

The shares of the original Company A are ESPP shares.  When I enter the initial transactions for these to populate the account, Quicken adds *two* securities to my list:  "Company A" and "Company A ESPP".  When I try to spin off the new company, the only option available in the wizard for "Security Name" is "Company A", but I don't have any of those (yet ... later the stock splits).  As an experiment I tried to enter the original shares as non-ESPP and then was able to spin off the new company without a problem.

I can also now see how Quicken creates the transactions for this spin-off, so understand the "Removed" and "Added" suggestion.  I'm wondering if that is the way to deal with this, by doing that manually for the ESPP shares, instead of using the wizard.  I'll try it the next chance I have.

Also wondering if this could be considered a bug in the wizard.

This topic has been discussed a few times in this forum (search for ESSP spinoff).  The Corporate Securities Spin-Off wizard does not support ESPP shares.

I think the best approach is to use Company B ESPP shares for the spinoff from the Company A ESPP shares.  The Removed and Added transactions may be produced using the Sold ESPP Shares and the Bought ESPP Shares wizards by choosing No when prompted regarding the use of a source or destination for funds.  The tricky bit is to produce the correct Company A and Company B ESPP lots and prices.  I suggest contacting Company A or your broker to learn the relevant details on the handling of ESPP shares due to the spinoff.

sotob

Thanks again, Sherlock. I'll look into this way of handling it in more detail, and as suggested have contacted the Company A for any guidance. Being a new 3 week user of the program, and not totally understanding yet how ESPP shares are supposed to be treated, I think entering this particular info for me will be a somewhat long process with research and a bit of experimenting.

It would have been nice for Quicken to have warned in the help menus about this lack of ESPP spin-off functionality in the wizard, not to mention the misdirection from customer support. Could have saved me a lot of time and frustration assuming the wrong source of the problem.

I sincerely appreciate your and q_lurker's time spent helping me with this!