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Accounting for ATT WBD Spin Off

DSL

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

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q_lurker

@mvwabs wrote:
For me, I am thinking it would be best to remove the AT&T shares from both accounts, and then add the AT&T share back into the accounts at the new cost basis established by each broker. Then, add the WBD shares to both accounts using the cost basis established by each broker.

The Remove / Add / Add sequence used to be my preferred methodology and (as best I recall) is the only way to get the cost basis right for each lot. The problem is that then the Average Annual Return figures are wrong.

Not too long ago Quicken adopted a process for that calculation that Remove Shares became an entry in the AAR calculations as a return (reference an Investment Performance Report showing the details). The value for that calculation is number of shares times closing price for that date. Add Shares get treated similarly as investments with the same multiplication used. That then means With the Remove Parent / Add Parent / Add Spinoff, the two parent considerations cancel each other and you end up with a net added investment to the calculation. The real world has the Removed market value equal to the Added market value meaning no additional investment occurred.

Which is worse -- basis of individual lots being wrong or Average Annual Return figures wrong?

The way around this is use both (sort of). Day of spinoff you use current Corporate spinoff action and accept that the basis of individual lots is wrong for the parent company. Next day you do the Remove Parent / Add Parent correcting the basis of each lot as needed. That next day Remove / Add pairing will neutralize each other in the AAR calculation.

Therefore, in the option you outline, the cost basis for the parent (AT&T) will also need to be adjusted for Account A and B.

I'm not following that exactly. As far as I have seen (limited testing), within each account, Quicken is keeping the cost basis correct. The before 'parent' cost basis equals the after 'parent + spinoff' cost basis. Are you suggesting or seeing something different?

q_lurker

neil154 said:

Before I applies the spinoff my AT&T stock showed a small positive return (made small amount of money after all dividends and stock prices are accounted for). After the spinoff the AT&T return showed a much larger positive return and the WBD had a even larger negative return so the sum of the returns for both stocks is now showing a large negative return. It would seem to me that the return immediately after the spinoff (after adding the 2 together) should be identical to the return before the spinoff.

Can you be more specific? In particular, what 'return' are you citing? Return as dollars or as percentage? When you 'sum of returns for both stocks' what summing are you doing or referencing? Some real numbers would be helpful if they are not too personally revealing so that others could replicate what you are seeing and provide guidance from there.

neil154

In the investing screen, I have a column which is titled "return" in dollars. Quicken states it as "Market value plus cash income plus sale income minus dollars invested (since you invested)". Prior to the spinoff the att return was +54.20, immediately after the spinoff the att return is plus 1829 and the WBD return is negative 2234.

mvwabc

@q_lurker - I am referring to the cost basis for the lots, not the total cost basis.

Which is worse -- basis of individual lots being wrong or Average Annual Return figures wrong? I want the cost basis to be correct.

q_lurker

OK. The basic spinoff transactions would have generated a RtrnCapX transaction for $___ and a MiscIncX transaction for $___. Do those two and the original 54.20 add to the $1829 figure in particular for the 4/11/22 As of Date? For later dates, you would have additional fluctuations up or down as the market value has changed.

For the WBD holding, how does the current market value compare to the shown cost basis?

neil154

Both the RtnCapX and MiscincX are negative and they total -11, 723. So the number do not balance. The market value immediate after the spinoff less the cost basis on same date is a negative 2234.

mvwabc

mshiggins said:

Ameritrade uses Gainskeeper for their cost basis tracking. Based on the share distribution I'm seeing there, it looks like the following prices were used:

T $21.77275
WBD $28.19187

I assume you did not get the prices you stated from TD Ameritrade, but have determined prices that will yield the WBD distribution percentage. The prices you provide will allow one to calculate a distribution percentage very close to the 23.8525% that TD Ameritrade used. However, the prices in your post fall outside the range of actual prices for T and WBD on April 11th, and other dates near the spinoff date. There are an infinite number of prices that could yield close to 23.8525%, provided the two prices are kept proportional. For example, when T is $1.00 and WBD is $1.313239835, you will get the same percentage as when using the prices you specify.

mshiggins

mvwabc said:

mshiggins said:

Ameritrade uses Gainskeeper for their cost basis tracking. Based on the share distribution I'm seeing there, it looks like the following prices were used:

T $21.77275
WBD $28.19187

I assume you did not get the prices you stated from TD Ameritrade, but have determined prices that will yield the WBD distribution percentage. The prices you provide will allow one to calculate a distribution percentage very close to the 23.8525% that TD Ameritrade used. However, the prices in your post fall outside the range of actual prices for T and WBD on April 11th, and other dates near the spinoff date. There are an infinite number of prices that could yield close to 23.8525%, provided the two prices are kept proportional. For example, when T is $1.00 and WBD is $1.313239835, you will get the same percentage as when using the prices you specify.

From the Gainskeeper data, I divided the post distribution total cost basis by the share quantity. The calculation was just to assuage my curiosity.

For the actual transaction data, I'm building QIF files for the T and WBD add shares transactions for the 70+ lots of T and WBD I have.

q_lurker

neil154 said:

Both the RtnCapX and MiscincX are negative and they total -11, 723. So the number do not balance. The market value immediate after the spinoff less the cost basis on same date is a negative 2234.

Negative where? In what column? The RtrnCapX should be negative in the Inv Amt column of the transactions list for the account and positive for the Cash Amt column. The amount in the Cash Amt column for the MiscIncX transaction could be positive or negative depending on what you paid for the ATT shares.

I don't know how big your holding is, but I think you have some other issue going on in your data.

neil154

The RtnCapX is showing the way you said and the MiscincX is negative.

I did a super validate on my data and no issue were found

bmccune

The spinoff function did not work for me. I entered two return of capital transactions for ATT in order to reduce my basis in that stock. I entered one transaction for the cash in lieu of that I received - which lowered my basis. I entered a second cash in lieu of in an amount equal to the new basis that Schwab was showing for me on the WBD stock I received (24 shares per 100 of ATT already owned). Then I showed a purchase of the WBD stock equal to the new basis assigned to me by Schwab which left the only change in cash as the cash in lieu that I had received. I did find the website costbasis.com very helpful, but ultimately deferred to the Schwab cost basis allocation - the difference not being material at all.

q_lurker

@neil154

I am not suspicious of data corruption; I am suspicious of incorrect data, placeholders, unintended data.

I know you said you used the Corporate Spinoff. Were any transactions downloaded from the brokerage relevant to these two securities?

Three places I'd be looking at this:
1) The transaction list -- Should show a RtrnCapX, a MiscIncX, and one or more Add Shares of WBD. All dated 4/11/22.
2) A portfolio view (Ctrl-U) - Grouped by Account. Columns including among other Shares, Price/Quote, Cost Basis, Market Value. Gain/Loss, and of interest to you Return. Be looking at that for 'As of' dates as the day before the spinoff (4/8/22) and the day of (after) the spinoff (4/11/22). I would customize that view to only include those two securities just to keep focused on them.
3) Investment Performance Report - Customize to applicable account and securities. As a minimum, the AT&T and Warner securities. In the setup for the report, include the Cash Flow Details. Any time frame (such as year to date) that include this spinoff is fine.

#2 -- Options / Portfolio preferences == what is setting for "Show Return Calculations from:"? Earliest Date probably makes the most sense but fundamentally, you just need to understand the starting point Quicken is using.
#2 -- Does the T holding before show a positive or negative gain/loss value. I'd expect a fairly small value since you are saying the "Return" before was only $54.
#2 -- Is the cost basis before (T only) equal to the cost basis after (T + WBD)?
#2 -- Is the after share count for WBD 24.1917% of the AT&T share count?
#3 -- If you expand the security listing to show lots (click the plus-sign or the Expand All button), do all lots of T before have cost basis values? Are they all as you would expect? After the spinoff, do all lots of T have cost basis values that are about 76% of the before values? Do all lots of WBD after have cost basis values that are about 1/3 of the comparable T (after) basis values consistent with 76% of the basis staying with the T shares and 24% transferring to the WBD shares?
#2 -- What prices are showing for the T and WBD shares after the spinoff (4/11)? I'd expect 19.63 and 24.78 for T and WBD respectively.

#3 -- The RtrnCapX and MiscIncX should show as two values in the Returns column. They should match the Transaction list entries. They should total the WBD value where that value is calculated as the number of shares times the value you used on the original Corporate Spinoff window. Thus it should be something close to original number of AT&T shares x 0.241917 x (approx) $24.78.
#3 -- Similarly the Add Shares for the WBD lots will show in the Investments column. Because of the way Quicken is now programmed, those entries should total number of WBD shares times 4/11/22 closing value of WBD (last of my #2 questions above.) Restated, that total should also be AT&T shares x 0.241917 x (approx) $24.78.

So does any of that reveal anything?

If you want to provide any screenshots, they might help, but I am also trying to limit your exposure of personal information.

neil154

Wow that is a lot of . See below for your comment and then my response.

1) The transaction list -- Should show a RtrnCapX, a MiscIncX, and one or more Add Shares of WBD. All dated 4/11/22. YES
2) A portfolio view (Ctrl-U) - Grouped by Account. Columns including among other Shares, Price/Quote, Cost Basis, Market Value. Gain/Loss, and of interest to you Return. Be looking at that for 'As of' dates as the day before the spinoff (4/8/22) and the day of (after) the spinoff (4/11/22). I would customize that view to only include those two securities just to keep focused on them. LOOKED THROUGH ENIRE HISTORY FOR BOTH SECURITIES AND NONE HAVE A AS OF DATE
3) Investment Performance Report - Customize to applicable account and securities. As a minimum, the AT&T and Warner securities. In the setup for the report, include the Cash Flow Details. Any time frame (such as year to date) that include this spinoff is fine. I CREATED THE REPORT BUT DON'T KNOW WHAT I SHOULD BE LOOKING FOR, NOTHING SEEMED OUT OF LINE

#2 -- Options / Portfolio preferences == what is setting for "Show Return Calculations from:"? Earliest Date probably makes the most sense but fundamentally, you just need to understand the starting point Quicken is using. PLEASE TELL ME ABOUT THIS DO NOT KNOW WHERE I AM SUPPOSE TO SEE THIS
#2 -- Does the T holding before show a positive or negative gain/loss value. I'd expect a fairly small value since you are saying the "Return" before was only $54. ESSENTIALLY A $11000 LOSS BUT OWNED FOR LONG TIME AND GOT LOT OF DIVIENDS
#2 -- Is the cost basis before (T only) equal to the cost basis after (T + WBD)?YES
#2 -- Is the after share count for WBD 24.1917% of the AT&T share count?YES
#3 -- If you expand the security listing to show lots (click the plus-sign or the Expand All button), do all lots of T before have cost basis values? Are they all as you would expect? After the spinoff, do all lots of T have cost basis values that are about 76% of the before values? Do all lots of WBD after have cost basis values that are about 1/3 of the comparable T (after) basis values consistent with 76% of the basis staying with the T shares and 24% transferring to the WBD shares?YES
#2 -- What prices are showing for the T and WBD shares after the spinoff (4/11)? I'd expect 19.63 and 24.78 for T and WBD respectively.YES

#3 -- The RtrnCapX and MiscIncX should show as two values in the Returns column. They should match the Transaction list entries. They should total the WBD value where that value is calculated as the number of shares times the value you used on the original Corporate Spinoff window. Thus it should be something close to original number of AT&T shares x 0.241917 x (approx) $24.78. YES
#3 -- Similarly the Add Shares for the WBD lots will show in the Investments column. Because of the way Quicken is now programmed, those entries should total number of WBD shares times 4/11/22 closing value of WBD (last of my #2 questions above.) Restated, that total should also be AT&T shares x 0.241917 x (approx) $24.78. YES

DRMick

I had a similar experience with the Corporate Spinoff Action, so I manually entered the transactions listed above to match my Schwab cost basis. Luckily since my ATT holdings are in IRA accounts, I do not need to calculate basis for each lot.

Charlie R

Just talked to Quicken inquiry #9445647 (5/2/22) was told there is a update coming to fix the issue of the T - WBD Spinoff.

neil154

Please post it here when you know the update has been issued

q_lurker

neil154 said:

2) A portfolio view (Ctrl-U) - Grouped by Account. Columns including among other Shares, Price/Quote, Cost Basis, Market Value. Gain/Loss, and of interest to you Return. Be looking at that for 'As of' dates as the day before the spinoff (4/8/22) and the day of (after) the spinoff (4/11/22). I would customize that view to only include those two securities just to keep focused on them. LOOKED THROUGH ENIRE HISTORY FOR BOTH SECURITIES AND NONE HAVE A AS OF DATE

The As of date is a selection on the portfolio view. It is not related to the transaction history. You can look at your portfolio information "AS OF" any particular date you specify. In this case the dates immediately before and after the spinoff are relevant.

neil154 said:

#2 -- Options / Portfolio preferences == what is setting for "Show Return Calculations from:"? Earliest Date probably makes the most sense but fundamentally, you just need to understand the starting point Quicken is using. PLEASE TELL ME ABOUT THIS DO NOT KNOW WHERE I AM SUPPOSE TO SEE THIS

When looking at a portfolio view, upper right is an Options selection (gear). One of those items to control is Portfolio Preferences.

neil154 said:
#2 -- Does the T holding before show a positive or negative gain/loss value. I'd expect a fairly small value since you are saying the "Return" before was only $54. ESSENTIALLY A $11000 LOSS BUT OWNED FOR LONG TIME AND GOT LOT OF DIVIENDS

So that's the catch it seems. You've got a $11K loss!? Now the question is why you are sometimes seeing a return of $54 and other times this big loss? I had assumed you were seeing this info from the same report / view / screen. Now I am not so sure.

Were those LOTS OD DIVIDENDS taken in cash or reinvested? Were they recorded in Quicken that same way? 10 years would be 40 dividends. There have also been a lot of AT&T activities (mergers and spinoffs) over the years. How long are we talking about? Were you recording those activities in your Quicken data? (That is, how big might this can of worms be that I am reaching into?)

neil154

The below is not a problem. I am seeing both numbers in the same report on the day prior to the spinoff. The gain does not include any dividends but the return includes dividends. Like I said I have received a lot of dividends
So that's the catch it seems. You've got a $11K loss!? Now the question is why you are sometimes seeing a return of $54 and other times this big loss? I had assumed you were seeing this info from the same report / view / screen. Now I am not so sure.

q_lurker

@neil154

I am seeing both numbers in the same report on the day prior to the spinoff. The gain does not include any dividends but the return includes dividends. Like I said I have received a lot of dividends

But what report? What exactly are you seeing?

What I see: On that Monday 4/11, I see the market value of T go from 24.14 to 19.63. In addition, 0.241917 shares of WBD get added it a closing value of 24.78.

19.63 + 0.241917 x 24.78 = 25.6247

This is an increase in value on that date from 24.14 to 25.6247 = 1.4847 per share of AT&T, a 6.15% increase in value on that one day. While you basic premise is sound that the return should not have been affected by the spinoff, this specific case seems to belie that generalization. Is that consistent with your numbers?

I am not seeing any issues (other than those previously noted) that would explain your changes. I suggest you create a portfolio view similar to below so that you might be able to better determine where the discrepancy is coming from.

Image: https://us.v-cdn.net/6031128/uploads/editor/4r/fbgf05ctctzn.jpg

neil154

Yes, I am looking at the same report that you show and my numbers are consistent with what you are saying.

Someone posted that there is suppose to be an update for the T spinoff, do you know anything about it>

q_lurker

If you are looking at a similar portfolio view, you should be able to see how the gain/loss and income matches with Return before and after, how the combined gain/loss increases by $1.4847/T-share from before to after, and how the RtrnCap and MiscInc impact Income (thus Return) from before to after. Somehow that info ought to explain how your Return changed as it did.

A fix? Only know what Charlie R posted here. I do not expect anything specific to this spin-off. My expectation for an overall correction to the spin-off action = Show me, I’m skeptical.

Jasmine93

Has anyone determined the prices for T and WBD that Schwab used in calculating the spin-off?

I've tried several combinations, and my total cost basis for T and WBD after the Corporate Securities Spin-off calculator is run are several hundred to several thousand dollars off.

I have decided to make the entries in Quicken match Schwab, since that will be what gets reported to the IRS when I sell.

I think the next time I hear one of my stocks is about to spin some part of itself off, I'm going to sell it immediately. This is too much hassle!

neil154

I am pretty sure that if you contact Schwab they will put you in touch with the right department and they can give you the info you want

cprgolds

I am not getting price updates for WBD, Anyone getting them?

neil154

go to tools>security list find wbd and check get quotes

cprgolds

> @neil154 said:
> go to tools>security list find wbd and check get quotes

I'm way beyond that. @neil154 - Have you gotten updates on this stock?

neil154

yes I have

neil154

Do you have more than 1 wbd, look also for warner brother discovery

cprgolds

neil154 said:

Do you have more than 1 wbd, look also for warner brother discovery

Solved! That is exactly what happened. I had some AT&T in a couple of trusts and an auto download from TD Ameritrade set up the WBD security.

Then I had some other shares that I was holding separately. When I entered the transaction, I probably did it too fast and set UP another WBD and no company name.

After a little cleanup on Aisle 9 all is good.

Thanks!

Charlie R

Did anyone notice that the brokers are changing the stock information for AT&T and WBD almost every day, looks like they have lost control of the spinoff info.