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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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DRMick

At Schwab, they break the costs down by the lots purchased on reinvestments, the WBD basis costs are there for years back to when they were still part of AT&T.

shelquis

q_lurker said:

@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.

I used the above script by @q_lurker and ended up with all lot share quantities and cost bases in exact agreement with my Ameritrade account. I did the step e) deletion of RtrnCapX, but I did not delete the associated MiscIncX. Should I heve deleted it? It wasn't obvious to me where it came into play. Besides the per lot share quantities and bases, are there any other things in the portfolio view I can check to verify that I got it all right? Thanks.

Clive Walden

Trying to enter this as Corporate Spin Off, but Quicken won't let me enter Warner Brothers Discovery as "New Company" says it already exists and pick a new name. Help!

Sherlock

Clive Walden said:

Trying to enter this as Corporate Spin Off, but Quicken won't let me enter Warner Brothers Discovery as "New Company" says it already exists and pick a new name. Help!

If you're not willing to use a unique name for the new company, you will not be able to use the Corporate Securities Spin-Off wizard to generate the transactions. If you're willing to provide a unique name for the wizard to use, you may subsequently replace the security in the generated transactions. It's your choice.

mshiggins

No longer relevant as posts have been merged.

Clive Walden

Yes, I read it, but it did not address my specific issue. At least, I could not find it. Quicken WILL NOT accept the new security name, because it is already in my portfolio.

Clive Walden

But, If I invent a name Quicken won't understand that it is really WBD when dividends etc. are downloaded from my brokerage. How do I sync it all up and turn the invented name into the real security?
> @Sherlock said:
> If you're not willing to use a unique name for the new company, you will not be able to use the Corporate Securities Spin-Off wizard to generate the transactions. If you're willing to provide a unique name for the wizard to use, you may subsequently replace the security in the generated transactions. It's your choice.

Sherlock

Clive Walden said:

But, If I invent a name Quicken won't understand that it is really WBD when dividends etc. are downloaded from my brokerage. How do I sync it all up and turn the invented name into the real security?
> @Sherlock said:
> If you're not willing to use a unique name for the new company, you will not be able to use the Corporate Securities Spin-Off wizard to generate the transactions. If you're willing to provide a unique name for the wizard to use, you may subsequently replace the security in the generated transactions. It's your choice.

Suppose you already hold the WBD security. To have Quicken's wizard generate the spin-off transactions, you would provide the new name, say ZZZ. Next, you would replace all the transactions generated by the wizard that reference ZZZ with the WBD security's name. That basically entails selecting the ZZZ security in each transaction and pasting the WDB security's name in it's place. When your done, you'll be able to delete the ZZZ security.

Seal

> @shelquis said:
> I used the above script by @q_lurker and ended up with all lot share quantities and cost bases in exact agreement with my Ameritrade account. I did the step e) deletion of RtrnCapX, but I did not delete the associated MiscIncX. Should I heve deleted it? It wasn't obvious to me where it came into play. Besides the per lot share quantities and bases, are there any other things in the portfolio view I can check to verify that I got it all right? Thanks.

I have the same question as @shelquis -- @q_lurker, Should we also delete the MiscIncX Unrealized Gain transaction that was automatically added using the Spinoff function?

Seal

I've highlighted the MiscIncX transaction in my register screenshot:

Capture.JPG

q_lurker

shelquis said:

q_lurker said:

@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.

I used the above script by @q_lurker and ended up with all lot share quantities and cost bases in exact agreement with my Ameritrade account. I did the step e) deletion of RtrnCapX, but I did not delete the associated MiscIncX. Should I heve deleted it? It wasn't obvious to me where it came into play. Besides the per lot share quantities and bases, are there any other things in the portfolio view I can check to verify that I got it all right? Thanks.

Yes, you can and should delete the MiscIncX transaction when following that script.

Where it comes into play -- The Average Annual Return calculation. AAR both in portfolio views and more clearly in the Investment Performance Report use the closing values of the securities for the additional investments. In the basic spinoff model currently in Quicken, you then have a "return" of the RtrnCapX value (a cost basis figure) and an 'investment' of the Add Shares at a closing price level. The MiscIncX transaction is supposed to bring the 'return' component up to the same level (closing price) so that the two sides balance and there is no effect from the spinoff on average annual return. Stated another way, RtrnCapX + MiscIncX should equal #Shares Added x closing price of those shares added on that date.

By following the script I suggested for multiple lot holdings, both the RtrnCap and MiscInc are not appropriate. BUT ...

That above script for the multiple lot situation results in Remove Shares Parent, Add Shares Parent, Add Shares Spinoff. For the AAR calculation, Quicken is then going to show the Remove and Add Shares of the parent company as cancelling each other (no effect on return) and then a additional 'investment' of the spinoff company (shares time closing price). Thus the script also messes up the Average Annual Return calculation. I have not (yet) concocted an adjustment for that induced error.

Jasmine93

> @Clive Walden said:
> Trying to enter this as Corporate Spin Off, but Quicken won't let me enter Warner Brothers Discovery as "New Company" says it already exists and pick a new name. Help!

Schwab added a new ticker WBDWV (I think) as a placeholder for the new stock. The name is the same. Go look in your Securities listing for a stock named Warner Bros..... Make sure it isn't being used for any transactions, then delete it. Try the Corporate Spin-off transaction again.

kenhergenhan

I have T shares in 2 accounts. T recently spun off shares of WBD. The Corporate Securities Spin-Off transaction button worked fine in the first account, but not in the second account. I had an error message: "Security name already in use, please enter a different name".

Tom Young

The Corporate Securities Spin-Off should work in ALL Accounts that have T in them at the time of the spin-off. You shouldn't need to enter the Corporate Securities Spin-Off action in each Account, which I'm guessing you did?

Are you saying that the Corporate Securities Spin-Off DIDN'T work in the second Account when you entered it in the first Account? It certainly should.

Sherlock

If the T security's names were the same, the Corporate Securities Spin-Off wizard should have handled the holdings both accounts. If you're not willing to use a unique name for the new company, you will not be able to use the Corporate Securities Spin-Off wizard to generate the transactions. If you're willing to provide a unique name for security the wizard to use, you may subsequently replace the security in the generated transactions. It's your choice.

kenhergenhan

Thank you Tom and Sherlock

Gator-72

AT&T has posted cost basis instructions for AT&T-WBD spinoff.

https://investors.att.com/stockholder-services/cost-basis-guide/worksheet/atandt-inc-wbd

Gator-72

AT&T IRS Form 8937 Attachment
:
:Part II
Line 14. Describe the organizational action and, if applicable, the date of the action or the date against which shareholders’ ownership is measured for the action.
At the close of business on April 8, 2022, AT&T completed the previously announced transaction to combine AT&T’s WarnerMedia business with Discovery by distributing, on a pro rata basis, all of the outstanding common stock of SpinCo to AT&T common stockholders of record as of April 5, 2022 (the “Distribution”). Pursuant to the Distribution, each holder of AT&T common stock received one share of SpinCo common stock for every share of AT&T common stock held as of the record date.
Immediately following the Distribution, a wholly owned subsidiary of WBD merged with and into SpinCo, with SpinCo surviving as a wholly owned subsidiary of WBD (the “Merger”). In the Merger, each share of SpinCo common stock immediately prior to the Merger was automatically converted into the right to receive 0.241917 shares of WBD common stock.
No fractional shares of WBD common stock were issued in connection with the Merger. All fractional shares that a holder of SpinCo common stock would otherwise have been entitled to receive pursuant to the Merger were aggregated by
pg. 2
an exchange agent and sold in the open market or otherwise as reasonably directed by WBD. The exchange agent made available the net proceeds thereof, after deducting any required withholding taxes and brokerage charges, commissions and transfer taxes, on a pro rata basis, to the holders of shares of SpinCo common stock that would otherwise have been entitled to receive such fractional shares of WBD common stock pursuant to the Merger.
Line 15. Describe the quantitative effect of the organizational action on the basis of the security in the hands of a U.S. taxpayer as an adjustment per share or as a percentage of old basis.
AT&T stockholders must allocate their aggregate tax basis in their shares of AT&T common stock held immediately prior to the Distribution among the shares of SpinCo common stock distributed in the Distribution and the shares of AT&T common stock in respect of which such shares of SpinCo common stock were received in proportion to their respective fair market values immediately after the Distribution.
AT&T stockholders will then have an aggregate tax basis in the shares of WBD common stock received in the Merger, including any fractional share deemed issued and sold for cash as described below, which is equal to the aggregate tax basis allocated to the shares of SpinCo common stock described above. Each AT&T stockholder’s aggregate tax basis in the shares of SpinCo common stock will be allocated among each share of WBD common stock based on the exchange ratio (1 : 0.241917 SpinCo to WBD). A SpinCo stockholder who receives cash in lieu of a fractional share of WBD common stock will be treated as having received the fractional share pursuant to the Merger and then as having sold that fractional share for cash. As a result, such stockholder will recognize gain or loss equal to the difference between the amount of the cash received for such fractional share and the tax basis allocated to such fractional share.
Line 16. Describe the calculation of the change in basis and the data that supports the calculation, such as the market values of securities and the valuation dates.
The U.S. federal income tax laws provide that the allocation of the aggregate tax basis discussed under Line 15 above is allocated based on the respective fair market values of the resulting shares of AT&T and SpinCo common stock received. However, the tax law does not provide any further guidance on the determination of fair market value. One approach to determine the fair market value of AT&T is to use the average of the opening and closing trading prices quoted on the New York Stock Exchange on April 11, 2022, the first trading day following the Distribution. With respect to the shares of SpinCo common stock, because there were no public trading prices for the stand-alone SpinCo entity (i.e., there were only trading prices quoted for the post-Merger WBD entity), one approach to determine the fair market value of shares of SpinCo common stock is to use the average of the opening and closing trading prices for shares of WBD common stock quoted on the
pg. 3
Nasdaq exchange on April 11, 2022, the first trading day following the Distribution, and adjust this share price to take into account the Merger exchange ratio (1 : 0.241917 SpinCo to WBD). Using the average of the opening and closing trading prices for shares of WBD common stock ($24.43) and shares of AT&T common stock ($19.26) on April 11, 2022, and taking into account the Merger exchange ratio (1 : 0.241917 SpinCo to WBD), approximately 23.48% of the aggregate tax basis held by the AT&T stockholders immediately prior to the Distribution would be allocated to the shares of SpinCo common stock received by such stockholders.
Other approaches to determine fair market value may also be possible. AT&T stockholders are not bound by the approach illustrated above and may, in consultation with their own tax advisor, use an alternative approach in determining fair market values for shares of AT&T common stock and shares of SpinCo common stock. AT&T stockholders should contact their tax advisor to determine the appropriate fair market values.
With respect to the Merger, AT&T stockholders will have an aggregate tax basis in the shares of WBD common stock received in the Merger (including basis allocated to any fractional shares deemed issued and sold for cash, as described above) which is equal to the aggregate tax basis allocated to the shares of SpinCo common stock as described above, with such basis allocated among each share of WBD common stock based on the applicable Merger exchange ratio (1 : 0.241917 SpinCo to WBD).
The following is an example illustrating how the methodology outlined above would be applied in determining tax basis allocation.
Example: Assume a U.S. stockholder owned 100 shares of AT&T common stock, 50 of which were acquired on Date 1 with an aggregate tax basis of $1,500 (or $30 per share), and 50 of which were acquired on Date 2 with an aggregate tax basis of $1,000 (or $20 per share), for a total aggregate basis of $2,500 ($1,500 + $1,000).
Pursuant to the Distribution, such U.S. stockholder received 100 shares of SpinCo common stock. Taking into account the assumed relative fair market values noted above, the U.S. stockholder would have (i) 50 shares of SpinCo common stock with an aggregate tax basis of $352.21 ($1,500 x 23.48%) that is treated as having been acquired on Date 1 and (ii) 50 shares of SpinCo common stock with an aggregate tax basis of $234.80 ($1,000 x 23.48%) that is treated as having been acquired on Date 2. In addition, the U.S. stockholder’s aggregate basis in the 50 shares of AT&T common stock that were acquired on Date 1 correspondingly would be reduced to $1,147.79 ($1,500 x 76.52%), and its aggregate basis in the 50 shares of AT&T common stock that were acquired on Date 2 correspondingly would be reduced to $765.20 ($1,000 x 76.52%).
Pursuant to the Merger, such U.S. stockholder received 24.1917 shares of WBD common stock (100 shares of SpinCo common stock x 0.241917), including the
pg. 4
0.1917 fractional share of WBD common stock deemed received by the U.S. stockholder and sold for cash. As a result, prior to the deemed sale of the fractional share of WBD common stock, the U.S. stockholder would have (i) 12.09585 shares of WBD common stock (50 shares x 0.241917) with an aggregate tax basis of $352.21, or $29.12 per share ($352.21 divided by 12.09585 shares) that are treated as having been acquired on Date 1 and (ii) 12.09585 shares of WBD common stock with an aggregate tax basis of $234.80, or $19.41 per share ($234.80 divided by 12.09585 shares) that are treated as having been acquired on Date 2.
The 0.1917 fractional share of WBD common stock has one segment with a tax basis of $2.79 ($29.12 x 0.09585) that is treated as having been acquired on Date 1 and a second segment with a tax basis of $1.86 ($19.41 x 0.09585) that is treated as being acquired on Date 2, for an aggregate tax basis in the fractional share of $4.65. The U.S. stockholder recognizes gain or loss with respect to the fractional share equal to the difference between the amount of the cash received for such fractional share and the $4.65 tax basis in such fractional share.
The U.S. stockholder has an aggregate tax basis of $349.42 ($352.21 minus the $2.79 tax basis allocated to the 0.09585 fractional share that is treated as having been acquired on Date 1), or $29.12 per share, in the 12 shares of WBD common stock received in the Merger that are treated as having been acquired on Date 1.
The U.S. stockholder has an aggregate tax basis of $232.94 ($234.80 minus the $1.86 tax basis allocated to the 0.09585 fractional share that is treated as having been acquired on Date 2), or $19.41 per share, in the 12 shares of WBD common stock received in the Merger that are treated as having been acquired on Date 2.
Line 17. List the applicable Internal Revenue Code section(s) and subsection(s) upon which the tax treatment is based.
The applicable Code sections upon which the tax treatment is based are Sections 354, 355, 358, 368, 1001 and 1223.
Line 18. Can any resulting loss be recognized?
The Distribution is intended to qualify for non-recognition of gain or loss under Section 355 and the Merger is intended to qualify for non-recognition of gain or loss under Section 368(a). Accordingly, a U.S. stockholder should not recognize any gain or loss in the Distribution or Merger (except for any gain or loss attributable to the receipt of cash in lieu of fractional shares of WBD common stock in the Merger).
Line 19. Provide any other information necessary to implement the adjustment, such as the reportable tax year.
pg. 5
The stock basis adjustments are taken into account in the taxable year of an AT&T stockholder during which the Distribution and the Merger occurred (e.g., 2022 for calendar year taxpayers).

Gator-72

It appears that Charles Schwab may be recalculating the AT&T-WBD spinoff. My account has reverted back to all of the cost being on my AT&T position and no cost present for the WBD position.

DRMick

I noticed that also 2 days ago. The WBD cost basis was NA and T basis went way negative. Looks like they fixed that this morning.

Charlie R

I checked the link
https://investors.att.com/stockholder-services/cost-basis-guide/worksheet/atandt-inc-wbd
E-Trade & TD Ameritrade numbers don't match the info shown on this link ????

q_lurker

Charlie R said:

I checked the link
https://investors.att.com/stockholder-services/cost-basis-guide/worksheet/atandt-inc-wbd
E-Trade & TD Ameritrade numbers don't match the info shown on this link ????

That AT&T link is not mandatory. There is no requirement that e-trade, TD Ameritrade or any other agency use those numbers.

Talk to them about the numbers they used. Backfit other values to fit their results. Live with the differences. Your choice.

mshiggins

I checked Ameritrade yesterday. The Gainskeeper costs for T and WBD have been updated to match the AT&T 8937 numbers.

I've been holding off loading the transactions to my file until the 8937 was published. Now that it looks like the numbers are settled, loading the transactions will be a project for an upcoming weekend.

For folks that download transactions, likely any cost numbers were from the initial Gainskeeper estimates. Likely need to delete the downloaded transactions and enter your own transactions.

joneisenberg

You probably all know this, but just to clarify for the thread, Quicken for Mac does NOT support corporate spinoffs at this point. You have to enter them manually.

Perhaps the most important information from the Form 8937 is the the ration of WBD shares for T is NOT 0.24 as widely reported but 0.241917.

The AT&T worksheet works well, but as someone pointed out may not align with what your brokerage has done. You can compare and contrast. For tax purposes, WE are responsible for getting it right, although the difference in some cases may be de minims and as long as your return aligns with what the brokerage firm reports, IRS will be happy. But if there are significant differences, the taxpayer is responsible for getting it right. The brokerage record-keeping is informational to the taxpayer.

joneisenberg

> @Charlie R said:
> I was told by TD Ameritrade that - T New Cost = 76.1475% of T orig Cost - WBD shrs rec in Spinoff =24.1917% per shr of T owned - the received WBD Shr Cost = 23.8525% of Orig T Cost per shr. when I use these numbers in I can match their numbers, but when I try to use the same numbers with my E*Trade account I can't get the numbers to match E*Trade.
> I tried letting Quicken do the numbers and they are all over the place. used T price $19.63 WBD price $24.78 and Spinoff .241917 ,completely confused

The number is 0.241917. However fractional shares are sold, so proceeding manually you have to enter the TOTAL shares including fractional shares with all their basis and then SELL the fractional shares taking with them their bit of the basis. This could be the difference in the 23.82525% but can't tell for sure.

joneisenberg

> @Clive Walden said:
> Trying to enter this as Corporate Spin Off, but Quicken won't let me enter Warner Brothers Discovery as "New Company" says it already exists and pick a new name. Help!

I don't see why you couldn't pick a new security name, then when the Tx are entered go in and manually change the security in those Tx to WBD.

joneisenberg

> @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?

Quicken for Mac does not have that transaction available as yet. It's a Windows-only function today.

Boze9

go to AT&T investor web page
they have it calculated for you
also Form 8937 shows all computations
fill in form provided and it computes all necessary data for you
0.241917sh of WBD for each Share of AT&T
dated April 11, 2022
WBD Value 24.43
AT&T Value 19.26

Gail9@

I spun off the WBD shares using the using the Quicken spin-off form but end result differs rather differently than the Merrell Edge values. What makes me wonder is if I should be doing a spin-off first of the At&T to SpinCo shares then followed by a spin-off of SpinCo shares to WBD? Am I all wet here? Totally confused. And unfortunately having been re-investing dividends since beginning of time so can't really go back to each share reinvested manually. What am I doing wrong?

q_lurker

@Gail9@
No, you don't need to do the SpinCo shares dance.
Not enough info to say what you are doing wrong.
Specifically, what entries did you make in the Spinoff form?