Accounting for ATT WBD Spin Off

DSL

Can anyone offer some advice on how to account for the ATT spin off of Discovery?

GeoffG

You can use Add Shares for the spinoff of WBD. The share amount was 0.24:1 @ $24.47/share.

q_lurker

May end up being pretty straightforward in Quicken.

As of close of business Friday, April 8, one share of AT&T (T) yielded 0.241917 shares of Warner Bros Discovery (WBD).  In Quicken, that will go in as a Corporate Spinoff action. 

It is your choice as to the fair market value to enter for that spinoff.  One might use today's (4/11/22) opening values of 18.89 (T) and 24.08 (WBD), or wait for the Form 8937 to be issued, or wait for information from your brokerage.  Those opening values would produces a total value of $23.715 such that 76.43% (18.89 / 23.715) of the T basis would stay with the original T holding and 23.57% (5.825 / 23.715) would transfer to the new WBD shares.

If you only have one lot of T, Quicken will produce good numbers.  If you have more than one lot of T, the cost basis of each lot will be in error, but the total cost basis of all T shares will be correct. 

I generally encourage users to wait for info from the brokers and for the Form 8937 before jumping in too far.  The Form 8937 could be a few days away or up to 6 weeks. Patience is a virtue.    
  

q_lurker

GeoffG said:

You can use Add Shares for the spinoff of WBD. The share amount was 0.24:1 @ $24.47/share.

A straight Add Shares will not reduce the basis of your AT&T (T) holding.  You can account for that with Remove shares of T and a set of Add Shares for each lot of T held at time of spinoff.  

bmciance

q_lurker said:

I generally encourage users to wait for info from the brokers and for the Form 8937 before jumping in too far.  The Form 8937 could be a few days away or up to 6 weeks. Patience is a virtue.    
  

I agree.  I just put in the add shares and will wait for my broker to assign the cost value.  

DSL

So nobody uses the Corporate Spin Off function in Quicken?

DSL

> @DSL said:
> So nobody uses the Corporate Spin Off function in Quicken?

Sorry. I saw someone left instructions in how to use the Corporate Spinoff :) . Thanks alot!

Leon Pink

#q_lurker, great input. I have owned AT&T for 20+ years with add'l buys and reinvesting the dividends. I'll take your to advice. Having well over 100 lots and trying to get it to balance could be a real pain, not to mention the time element in getting it done.

#GeoffG good idea about utilizing the Add Shares function as a good temporary fix for the new WBD shares.

Appreciate both of your comments.

q_lurker

@Leon Pink
With 100+ lots, you'll have a decision to make -- just how important is it to you to have the correct basis for each lot?  If it is important enough ... 

a) Backup your file
b) Decide on the correct fair market values to use.
c) Independently determine correct adjusted basis for each of your 100+ T lots.  (approx. 76% of it's prior basis)
d) Do the Corporate Spinoff (the Adds for the WBD lots should come out correct)
e) Delete the RtrnCapX generated by the spinoff
f) Do a Shares Transferred of the T shares from this account to this same account.  (you'll get the 100+ Add shares transactions you need with the correct share quantity and acquisition date in place)
g) Edit each of those 100+ Add shares to reflect the correct adjusted (76%) basis.
h) Check the final results.  In the end, you should have one Remove Shares (T), and per lot - one Add Shares of T and one Add Shares of WBD.  

To all users, the share ratio of 0.241917 will undoubtedly generate a fractional share of WBD which you will not receive.  Instead, you will receive a 'cash-in-lieu' amount.  In Quicken, you need to sell that fractional share for that cash-in-lieu amount as a final step.

I would also take the step of editing the WBD Add Share transactions to tweak the share quantity for each lot to my desired level of precision (I choose three digits after the decimal point typically, you might prefer 3, 4, or maybe even 5).  I believe this then avoids share quantity roundoff issues later in the life of the holding.         

Dave201

I should have sold it before the spin-off? 🤪
I am sure that my numbers are wrong but don't care so much..

Paperclip13

Thanks for the advice, however, I cannot find the Corporate Spinoff function. Where do I look, it is not in the list of transactions?

Jim_Harman

Paperclip13 said:

Thanks for the advice, however, I cannot find the Corporate Spinoff function. Where do I look, it is not in the list of transactions?

Click on Enter transactions at the top left of the account.
Select Corporate Securities Spin-off from the Enter Transaction dropdown list.

DSL

Its a transaction option same as if a dividend were paid, or a sale, etc. Its in the dropdown .

DRMick

[Removed - Duplicate]

jimshu1

Thanks for all of the info.!

Mrtanman

When will Quicken add / download/ update the WBD shares to all of my accounts ( Schwab/ Amertrade/Ally )-- 3 different Brokerage houses ALL show my WBD shares at their sites -- but still NOTHING on Quicken

Jim_Harman

Mrtanman said:

When will Quicken add / download/ update the WBD shares to all of my accounts ( Schwab/ Amertrade/Ally )-- 3 different Brokerage houses ALL show my WBD shares at their sites -- but still NOTHING on Quicken

Quicken does not control what gets downloaded from brokers.

GeoffG

q_lurker said:

A straight Add Shares will not reduce the basis of your AT&T (T) holding.  You can account for that with Remove shares of T and a set of Add Shares for each lot of T held at time of spinoff.  

There is no reduction to AT&T shares...

"Under terms of the agreement, which was structured as a Reverse Morris Trust transaction, at close AT&T received $40.4 billion in cash and WarnerMedia’s retention of certain debt. Additionally, shareholders of AT&T received 0.241917 shares of WBD for each share of AT&T common stock they held at close. As a result, AT&T shareholders received 1.7 billion shares of WBD, representing 71% of WBD shares on a fully diluted basis. Discovery’s existing shareholders own the remainder of the new company. In addition to their new shares of WBD common stock, AT&T shareholders continue to hold the same number of shares of AT&T common stock they held immediately prior to close."
Quicken.com

mshiggins

GeoffG said:

q_lurker said:

A straight Add Shares will not reduce the basis of your AT&T (T) holding.  You can account for that with Remove shares of T and a set of Add Shares for each lot of T held at time of spinoff.  

There is no reduction to AT&T shares...

"Under terms of the agreement, which was structured as a Reverse Morris Trust transaction, at close AT&T received $40.4 billion in cash and WarnerMedia’s retention of certain debt. Additionally, shareholders of AT&T received 0.241917 shares of WBD for each share of AT&T common stock they held at close. As a result, AT&T shareholders received 1.7 billion shares of WBD, representing 71% of WBD shares on a fully diluted basis. Discovery’s existing shareholders own the remainder of the new company. In addition to their new shares of WBD common stock, AT&T shareholders continue to hold the same number of shares of AT&T common stock they held immediately prior to close."
Quicken.com

The reduction is in the ATT *basis* not the number of ATT shares. 

LittleMasti

> @Jim_Harman said:
> Click on Enter transactions at the top left of the account.
> Select Corporate Securities Spin-off from the Enter Transaction dropdown list.

Thank you for your input. Assume I hold a single lot of 100 AT&T shares with a PPS of $25.20. Could you kindly walk me through the steps of recording the transaction using corporate security spin-off options? Perhaps I was doing something wrong because it replaced T with WBD.

jimshu1

"Jim_Harman SuperUser ✭✭✭✭✭ April 12 edited April 12 Click on Enter transactions at the top left of the account. Select Corporate Securities Spin-off from the Enter Transaction dropdown list."

Sorry for the manual quote. For some reason, if I click on quote, I can no longer enter new text in my comment??? I'm computer/forum savvy but spent a bit of time trying to figure this out. I quit. Anyway:

 ***************************************************************************************************** I

I think this has been the best answer, but there are complications and I think it is just better to allow your brokerage company to download the WBD shares at zero cost basis and leave AT&T basis alone. Long explanation for those curious. Personally, I'd skip it.

I owned AT&T in both my ROTH IRA and my wife's ROTH IRA. On a secondary system, with my active Quicken file opened, I went through the process of using Quickens Corporate Spinoff function. Attached below is a screenshot of my entries. By the way, the new WBD price is different in both accounts. Mine was $18.60 and my wife's was $17.51. No one account can use a standard WBD price for the spinoff.

So, Quicken worked hard setting up the cost basis for all of the new WBD shares, and reducing the cost basis for the existing AT&T shares. After 3-5 minutes of churning, it gave me my new WBD share balance. It was fractionally off, so I bought AT&T shares equal to the dollar difference. All looked good!

I went to my wife's IRA and did the same, except she had a different WBD basis price. No problem. Let it churn and clicked on holdings. Both my WBD position and my wife's show up in each of our separate accounts. There is no adjusting my wife's fractional shares, all shares of WBD, regardless of the account show up.

Just to finish off this experiment, I downloaded from my broker. The download just wanted to add more shares and did not recognize my existing entered positions even though I had edited the WBD security entries to show the stock symbol. Of course, if the above had worked, I'd just delete the download.

Didn't save anything. That's what running Quicken on a secondary system if for...

q_lurker

Ahhh.  A misinterpretation perhaps?  

The fields for Cost per old share and Cost per new share have NOTHING to do with what you paid for the AT&T shares; nothing to do with your 'costs'.  As explained in the help for that wizard, the values for those fields are the fair market values of the two securities immediately after the spinoff was generated.  As such, the same two values apply to all lots and all shares in all accounts.  (See following comment only for very rare theoretical situation). 

There are a variety of ways the user can develop and apply those fair market values.  In a prior post (above) I offered the opening values for the day after the spinoff, but that was just as an example of one possibility. 

The math becomes:

BASIS(spinoff) = FMV(spinoff) x SR / [ FMV(spinoff) x SR + FMV(parent) ] x BASIS(parent-before)
and 
BASIS(parent-after) = FMV(parent) / ( FMV(spinoff) x SR + FMV(parent)) x BASIS(parent-before)

It is sometimes necessary to back-figure appropriate fair market values to use in order to matchup with a brokerage or other source.

Referencing your screenshot -- 
As I see it, there is no justification for saying the fair market value of the AT&T shares after the spinoff was $24.14.  If you are using that value from the close for T on 4/8, that is the close before the spinoff, not after.  It is not the appropriate value.  The proper value should be in the high $18 or $19 range.  Similarly, the fair market value of the WBD shares needs to be in the $24 range.  Perhaps you have those reversed.  But even then, I can't imagine where a 18.60 vs 17.51 difference on the WBD value would come from.

I suggest looking at both accounts and determining what percentage of the 'before' ATT basis got transferred to the WBD holding.  I'd expect the percentages to be within one or two tenths of a percent.  My number above was 24.57% (unsubstantiated) but I see costbasis.com currently produces a 23.394% figure.  I don't know what their raw input was.    

(The rare theoretical situation:  It is possible that two different brokerages might use different fair market values since there is not singular defined method to determine them.  If an investor had shares of the parent at two different brokerages using two different pairs of fair market values, the user might have to manually edit one set of resultant transactions.  In the real world, the difference between values brokerage might use should be small and the effects are likely to be non-consequential.)

Finally, I disagree that it is better to rely on the downloads from the brokerage to get the data right.  All too often, the broker's downloaded transactions are clunky, fail to include the cost basis of the newly distributed shares, and may not alter the basis of the original holding.  But as almost always applies with Quicken, if you find something that works to your satisfaction, carry on.  
  

LittleMasti

> @jimshu1 said:
> "Jim_Harman SuperUser ✭✭✭✭✭
> April 12 edited April 12
>
> Click on Enter transactions at the top left of the account.
> Select Corporate Securities Spin-off from the Enter Transaction dropdown list."
>
> Sorry for the manual quote. For some reason, if I click on quote, I can no longer enter new text in my comment??? I'm computer/forum savvy but spent a bit of time trying to figure this out. I quit. Anyway:
>
>  *****************************************************************************************************
>
> I
>
> I think this has been the best answer, but there are complications and I think it is just better to allow your brokerage company to download the WBD shares at zero cost basis and leave AT&T basis alone. Long explanation for those curious. Personally, I'd skip it.
>
> I owned AT&T in both my ROTH IRA and my wife's ROTH IRA. On a secondary system, with my active Quicken file opened, I went through the process of using Quickens Corporate Spinoff function. Attached below is a screenshot of my entries. By the way, the new WBD price is different in both accounts. Mine was $18.60 and my wife's was $17.51. No one account can use a standard WBD price for the spinoff.
>
>
>
>
>
>
>
>
> So, Quicken worked hard setting up the cost basis for all of the new WBD shares, and reducing the cost basis for the existing AT&T shares. After 3-5 minutes of churning, it gave me my new WBD share balance. It was fractionally off, so I bought AT&T shares equal to the dollar difference. All looked good!
> I went to my wife's IRA and did the same, except she had a different WBD basis price. No problem. Let it churn and clicked on holdings. Both my WBD position and my wife's show up in each of our separate accounts. There is no adjusting my wife's fractional shares, all shares of WBD, regardless of the account show up.
> Just to finish off this experiment, I downloaded from my broker. The download just wanted to add more shares and did not recognize my existing entered positions even though I had edited the WBD security entries to show the stock symbol. Of course, if the above had worked, I'd just delete the download.
> Didn't save anything. That's what running Quicken on a secondary system if for...

It worked like magic, no doubt about it. Because Quicken was unable to import data from my brokerage account, a little tweaking is necessary. Thank you sincerely.

Megapixels18

A question for @q_lurker about filling in the “Corporate Spinoff” window with the dollar amounts of the Fair Market Values for each of AT&T and WBD immediately after the spinoff: I’ve gone through spinoffs in Quicken, previously, so I understand the definition of what values are supposed to be input. However, what ARE those two dollar values for this spinoff?

I’d like the cost basis of each of AT&T and WBD, after going through the Corporate Spinoff window, to at least be VERY close to what my brokerage firm shows in each of my accounts. I know, from previous experience, that the cost basis per lot in Quicken isn’t always exactly the same as the brokerage’s info, but in the past I’ve had the TOTAL cost basis for each of the 2 positions match what my brokerage firm showed.

Aside from knowing the exact ratio of WBD shares received — 0.241917 — for each share of AT&T, the only other info my brokerage firm was able to give me about how THEY allocated the cost basis was that, of my pre-spinoff cost basis in AT&T, 23.3942348 % went to WBD and thus the remainder — 76.6057652 % — is the adjusted (post-spinoff) cost basis of AT&T.

But that info, not being per-share FMV dollar amounts for the purpose of the Quicken Corporate Spinoff window, still leaves me unable to use that window to get the cost basis correct (or close to correct) in Quicken. I haven’t done anything yet, with the Corporate Spinoff window, nor anything else that would affect my info in Quicken.

So, what do I do with the Corporate Spinoff window to record the spinoff, and the cost bases of AT&T and WBD, in Quicken?

TexMike

How do you adjust the price history for AT&T after the spin? Downloading historical prices does not change my price history to the post-spin prices. I've been entering one by one using Yahoo historical price history. It's grueling!!! What am I doing wrong, or is it Quicken's vendor for security prices...

Megapixels18

An addendum to my earlier (today) lengthier post in which I mentioned the percentage allocation of cost basis between the remaining AT&T and WBD that i received from my brokerage firm: since they said it came from an outside vendor, I would think that the outside vendor probably supplies that same info to all brokerage firms. So, I would think that info likely comes from AT&T, but I haven’t found anything on its website — and, to come up with those percentages, wouldn’t AT&T have had to make sure those percentages were derived from the per-share dollar FMVs it would have to report on its IRS Form 8937?

sblake

My account is with Fidelity. I used 19.63 for AT&T closing price and 24.78 for WBD closing price. Using the Corporate Spinoff my basis on AT&T was higher by .01. My basis for WBD was 1.58 lower so I decided that was close enough. This was the end result after posting a sale of the fractional sales.

q_lurker

@Megapixels18
The math with your percentages works out as shown here:

    

I suggest using the closing value of ATT on 4/11.  That leads to the 24.78 value for WBD which also happens to be the closing value on that date.  Must be what your brokerage did.  And it turns out that choice helps with a couple of other Quicken quirks in this case.  I would also be dating the spinoff on the 4/11 date.    

Megapixels18

Thank you! In the meantime, I had created a temporary Quicken backup file to help me figure out which date’s prices — 4/8/22 or 4/11/22 — were used, and also whether it was the closing prices for those dates or the averages of the high and low prices (for each security) for those dates. So, it turned out that the closing prices for each on 4/11/2022 — $19.63 for AT&T and $24.78 for WBD — result in a very close, almost-match, to my brokerage firm’s cost numbers for the total for each position. Oddly, they’re off by literally only a couple of cents in 2 of my accounts — taxable brokerage and T-IRA. But somewhat more off in my Roth IRA (still, by less than a dollar). I’ll accept that!

jimshu1

Megapixels18 said:

Thank you! In the meantime, I had created a temporary Quicken backup file to help me figure out which date’s prices — 4/8/22 or 4/11/22 — were used, and also whether it was the closing prices for those dates or the averages of the high and low prices (for each security) for those dates. So, it turned out that the closing prices for each on 4/11/2022 — $19.63 for AT&T and $24.78 for WBD — result in a very close, almost-match, to my brokerage firm’s cost numbers for the total for each position. Oddly, they’re off by literally only a couple of cents in 2 of my accounts — taxable brokerage and T-IRA. But somewhat more off in my Roth IRA (still, by less than a dollar). I’ll accept that!

Did you run the Corporate Spinoff Wizard separately for each of your accounts that held AT&T? Are the resulting WBD holdings correct in each account. I had an issue with the holdings being duplicated between two Roth IRA accounts. The WBD holdings showed for both accounts when I just looked at the holdings in one account.

Megapixels18

@jimshu1

No, Quicken doesn’t allow you (as far as I know) to run the Corporate Spinoff Wizard separately for each of my accounts that holds AT&T. I think it makes sense not to allow it to be done separately, since in any corporate spinoff there’s the same distribution ratio (# of shares of WBD received for each share of AT&T) and the same cost-basis allocation (in this case, using the closing prices of each of the 2 companies on 4/11/2022) for all shares regardless of the accounts in which they’re held.

Yes, the numbers of shares of WBD in each account were correct (I had separately calculated what those numbers should be, based on the # of shares of AT&T in each account and using the actual distribution ratio of 0.214917 0.241917 (edited) shares of WBD for each share of AT&T). Of course, in each case the resulting number of shares included fractional shares. So, when I received the cash-in-lieu yesterday (4/13/2022) for the fractional shares, in each account I recorded a sale of the relevant # of fractional shares. For the sale price per share, I calculated it for each account using the dollar amount of cash received and dividing it by the number of fractional shares. So, with the calculated per-share sale price and the number of fractional shares input, the Quicken “Shares Sold” window came up with the correct amount of cash proceeds received in each account — it has to, mathematically. (Because the number of fractional shares was so small in each account, the per-share “sale” price I calculated was a bit different for each of my 3 accounts. I assume it’s due to the rounding and the small $ amounts and # of shares involved, although I would have thought that the brokerage firm would have used the same per-share sale price to calculate the cash-in-lieu.)

I can’t take a guess at why you showed duplicate holdings of WBD in two accounts. Did you download the spinoff transaction, for each of your accounts, from your broker (showing that X number of shares of WBD were added to your accounts) and did you “accept” those downloaded transactions into your accounts before you used the Corporate Spinoff wizard?

When I had run a download update on all my accounts, before using the Corporate Spinoff Wizard, I did NOT “accept” the downloaded transactions (related to AT&T and WBD) from my broker. I left them alone. I didn’t delete them until after I had run the Corporate Spinoff Wizard , saw that the cost bases matched (fairly closely) what my brokerage firm showed, and “sold” the fractional shares as I described (manual input of the sale).

If you have a backup copy of Quicken data made before you might have downloaded (and accepted) any spinoff-related transactions from your broker, make a separately named backup of the Quicken data file and then try entering the spinoff-related transactions the way I did: Use the Corporate Wizard as described, “sell” the fractional shares, and then see whether that matches what your brokerage shows for those accounts.