What's the best method for recording a muni bond exchange split into smaller bonds?

Question

Q2020 R28.24 Build 27.1.28.24

Hi. In a non-qualified account I have a Muni which was exchanged into 2 smaller quantity bonds, one all details the same, different CUSIP; one details the same except now a PRE date (instead of a call date). This is a true exchange not a sell/buy situation.

In a post a few years back, a similar question, except the bond details were identical except for the CUSIP, add/remove shares was suggested (https://community.quicken.com/discussion/7317829/exhanging-bond-issues)

Is that still the best method, or is there another approach to handling this?

If that is the only way to do this, add/shares generally is used for stocks. Do I treat the number of shares field as the number of bonds field? Is there any behind the scenes difference that Quicken attributes using add shares vs buy bonds, in terms of "marking" the security as a bond vs stock?

Thanks.
 Janet

jrm · Answer

@q_lurker

Thanks for the additional follow-up. After reading this a couple times, and sitting down with a new test data file, I realized the error I made, which is I only added 5 shares (the number of new bonds from the exchange) instead of 50 (the number of shares) and then screwed up the new basis as well.

The brokerage statement doesn't indicate any information re basis for the new shares, but in a conversation I had when the transaction first occurred and I was asking for an explanation, I was told the basis would remain the same.

So, if I did this right this time around, here's what it looks like....

bond orig detail 09-23.jpg

new bond 1 09-23.jpg

bond removal 09-23.jpg

new bond 2 09-23.jpg

new bond 2 detail 09-23.jpg

new bond 1 detail 09-23.jpg

q_lurker · Answer

I can't comment on the PRE date option, unless that is effectively a Call option (where the borrower/issuer has the option to pay off the debt before the maturity date).

Further, for this situation, I don't specifically know how the original basis gets divided to the two new bonds.  I'd say trust your brokerage to report that info to you (and check that it makes sense).

So you originally bought 1/24/20 10 bonds (100 shares) for a basis of $11,300.60.
Now you are going to remove those 100 shares and add what?  
5 'shares' of the '576000ZR7' bond with a basis of 282.37, and
? shares of a different bond with a basis of (11,300.60 - 282.37) = 11,018.23.
Meaning I would expect the basis of what was removed to match the basis of what was added.  The before and after current values should be close but may not be an exact match on the total.

(Generally I would be expecting those 5 shares of '576000ZR7' to be paying off $500 at some point in the future. True?  OR is it 50 shares that eventually redeems for $5000.)

jrm · Answer

@q_lurker I track my investments manually, as in the past I've had trouble using automated downloads. I appreciate the reply, and if you have further guidance, would appreciate that, too.

Thanks.
 Jaet

> Within Quicken the Bonds Bought function operates that bought '$1000' bonds and Quicken treats those as $100 shares.  If you buy 25 bonds (at something close to $1000 each or with a face value of $1000), then Quicken records this as buying 250 'shares' using the $100 base value.  Subsequent valuations of the bonds use that $100 baseline.
 > 
 Interesting way of looking at this. Thanks for putting it into "share" terminology to explain Quicken's viewpoint.

> So the Add Shares operation should parallel that mode.  Enter 10x the number of $1000 bonds that you received in the exchange as the number of shares added.  
 > 
 I think I'm missing something here. I know to use the original buy date as the date acquired, and I assume I ignore the original accrued interest as Quicken enters that as a separate cash transaction. I assume I would also add in the original cost basis in. But, something doesn't look right to me for basis, or I'm not following.

See my pics

I had $10,000 bond value, so original transaction has 10 bonds, which as use note, in holdings show up as 100 shares. So, in the add, are you saying I should have this as 50 shares for the CUSIP? But, that still doesn't seem to have my basis right.

I originally thought I'd leave it as the old CUSIP, except one has a call and one a PRE and I see in the August  statements they are at different prices. (Also, when adding a bond Security it only gives a call date option, not a PRE date option. Should I just add the PRE date in?

Thanks for all your help!

Q orig bond transaction.jpg

Q new bond details w cusip.jpg

Q add shares new bond.jpg