WABTEC Spin-Off

Geobrick

Now that we all have out 1099s, how did your brokerage handle the WABTEC spin-off from GE and does it change how we should we enter it into Quicken?

Geobrick

To elaborate:
I have GE at 3 different brokerages and all seemed to handle it differently (but at one brokerage, I didn't have enough GE to get a full share of WABTEC).

- At etrade, they seemed to handle it the way q_lurker and Tom Young described in the March 2019 thread (treat it as dividend from GE at $78.06 per share of WABTEC issued).

- At Merrill Lynch they apparently only counted the whole shares in the dividend received. In this account, I had 300 shares of GE which should result in 1.6113 shares of WABTEC yet the dividend shown on my 1099 was only $78.06. The same happened with an account there with 850 shares of GE. It should have resulted in 4.56535 shares of WABTEC, a dividend of $356.12 but the 1099 only shows $312.24 (the exact value of 4 share). Yet, in the 1099-B section, they show a basis reflecting the correct $78.06/share price. With that approach, they're not showing any tax burden for the basis of the fractional share. Not a big deal to me (plus it's in my favor unless I manually make a change to the 1099 in my tax return), but if you apply it to everyone with GE shares at Merrill, it adds up.

- At Oppenheimer where I didn't have enough shares of GE (175) to get a full share of WABTEC, there is no dividend on the 1099-DIV and 1099-B shows the cost basis for the fractional share as $0.00 (meaning I'm on the hook to pay capital gains on the full proceeds from 0.939925 shares of WABTEC). Again not a big deal but it adds up for all the shareholders out there.

Overall it's a big mess out there. I expect we may all be getting amended 1099s for this.

q_lurker

For reference, the other cited (now closed) disussion.
https://community.quicken.com/discussion/7850048/ge-wab-spinoff-with-cash-for-partial-share/p1
Not a shareholder at the time, so no 1099s to deal with.

Geobrick

Thanks. I saw the closed discussion but that was before we all had out 1099s. I'm going to follow what you referenced but it won't match the way Merrill and Opco handled it in their 1099s.

Geobrick

Another example of how Merrill Lynch ignores the value of the fractional share when calculating the value of the dividend in a stock distribution comes from the distribution of Spectrum Brands from Jefferies on 10/11/2019.
Jefferies distributed 0.0250589 shares of Spectrum Brands for each share of Jefferies held.

The value of Spectrum at the close on that date was $49.45.
I Held: 125 shs of Jefferies
I Rcvd: 3.1323625 shs of Spectrum Brands
The total dividend/basis for spectrum should be ~$154.89 (3.1323625*49.45)

But the Merrill 1099 shows the dividend as $148.35 or 3*49.45, ignoring the value of the fractional share. Yet for the Cash in Lieu of the fractional share, Merrill uses $6.54 as the basis for the CIL. That's the correct basis for the fractional share but Merrill didn't include that amount in the dividend. So they're using a basis that wasn't accounted for in the initial dividend.

In other words, in my case, there's $6.54 that's never exposed to being taxed as a dividend when it should be. Again, it's a small amount (and it's in my favor) but it adds up when you consider all the fractional shares resulting from this stock dividend.

One argument can be the fractional share was never really delivered and we just got the cash value of it but then how can a basis other than $0 be applied.

Again, I'm just going to use Merrill's numbers for tax purposes. I'm Just venting about how inconsistent these things are across brokerages in the age of computers where we shouldn't have to think about these things. If it weren't for trying to track it correctly in quicken, I'd just trust the 1099 and be done.