Adding Shares at No Cost

shelquis

I received GEHC shares following a GE Spin Off. I'm not ready to use the Q spin-off wizard. If I just add the GEHC shares received at no cost now for tracking purposes, will I be creating any issues that will need to be corrected later? This will allow me to follow the current market price of the GEHC shares? I don't believe there was a corresponding decrease in the number of my GE shares held. I believe that I will need to reduce the original cost basis of my GE shares (which will be done via the Q Wizard if I choose to use it later). Is that also correct?

Frankx

HI @shelquis,

If you don't have confidence that Quicken can handle a spin-off, I understand that (although my experience is simple transactions like this one is that Quicken does a good job of it).  You asked "will I be creating any issues that will need to be corrected later" - that answer is absolutely yes.  And yes the transaction, that you don't want to enter now, will spread your cost basis between your original holding, and the spin entity. 

What I don't know is what you refer to as "Q Wizard" and how delaying the inevitable is going to benefit you.

Frankx

shelquis

Frankx. I have no concern regarding Q's ability to handle this transaction. Rather, my "delay" is entirely due to my lack of knowledge related to the Q Spin-Off Wizard. I want to use it properly when I do use it (to prevent the potential GIGO issue).  Preventing GIGO is my hoped-for benefit. I just need more time to learn about the Wizard before I use it. I guess you answered my original question, ie, I should not Add the GEHC shares at no cost. My only motivation for that is to easily track my GEHC portfolio value, but following your advice, I'll not be doing that. Thank you.

Mark1104

if the shares are in an IRA, there is no impact.  Cost basis doesn't mean anything within an IRA.... if the shares are in a non-qual account and you don't care about cost basis, then it still won't matter.   When you sell the shares, what the brokerage reports to the IRS as the cost basis is what matters in any event. 

Frankx

Hi again @shelquis

Thanks for the clarification.  I understand completely, now.

The only other comment that I'll make is to say that I've used Quicken to record a number of these type of securities transactions and, partly because the methodology required to record this type of transaction is rather straight forward, I've not had an incorrect result. 

That being said, I would suggest that you make a good backup of your datafile prior to trying the entry, and also calculate manually what the result should be (basically the correct allocation of the basis between old and new) prior to actually entering it with the wizard, as that will be a basis to know whether Quicken executes it correctly. 

Let me know if you have any followups.

Frankx

mshiggins

Details on how to enter the GEHC spinoff here:

https://community.quicken.com/discussion/7926850/need-step-by-step-instructions-for-recording-the-ge-spin-off-of-gehc-healthcare-edit#latest

q_lurker

I received GEHC shares following a GE Spin Off. I'm not ready to use the Q spin-off wizard. If I just add the GEHC shares received at no cost now for tracking purposes, will I be creating any issues that will need to be corrected later? 

Corrected for what purpose?  If you want your Quicken data to to as close as possible to 100% accurate currently and historically, then yes you will be creating issues that need to be corrected.  If your only purpose is to have a picture of current value, there would not be any issues to correct.  You can Add those shares with or without cost at this time depending on what you know at this time.  You can change that cost at a later time if different information becomes avalable.

This will allow me to follow the current market price of the GEHC shares? 

You can follow the current market price of GEHC shares without such an Add Shares.  Create the security and put it in your Watch List to get current share price downloaded.  But I think you are really wanting to see the current market VALUE of GEHC in your portfolio.  The Add Shares transaction will do that. 

I don't believe there was a corresponding decrease in the number of my GE shares held. 

Correct.

I believe that I will need to reduce the original cost basis of my GE shares (which will be done via the Q Wizard if I choose to use it later). Is that also correct?

The cost basis of your GE holding was reduced by this event.  Whether you need to do that in your Quicken representation is your choice.  If you need an accurate portrayal for tax planning, income estimates, financial decision making, etc. then yes you would need to make the reduction.  That can be done through the Quicken Corporate Spinoff action (your Q Wizard), or it can be done by you manually. 

The 'Q Wizard' is currently accurate for a single lot holding of the parent company (GE).  For a multi-lot holding of the parent company, the cost basis of the individual lots of the parent will not be correct, but the total cost basis of the parent will be correct.  The Cost basis of the spinoff (GEHC) will be correct in total and by lot.  A correction to the generated transactions may be necessary for (close to) 100% accuracy if the closing prices for parent and spinoff on the spinoff date are different than the prices entered in the 'Q wizard'.

Probably more than you wanted to know.  Also, Just my opinions.  

  

NotACPA

@Mark1104, " Cost basis doesn't mean anything within an IRA"

Maybe not for tax purposes ...  but it sure as H ...  does for investment performance purposes.

Mark1104

@notacpa - nope - as there is no cash going in or going out with respect to the split, the IRR of the combined investment is predicated on the original investment (which may also be the cost basis).  If IRR is measured from the date of the split forward, the cost basis does not matter as the IRR is predicated on the value of the investment on that date.... cost basis is most critical for determining the taxes that are owed upon sale...otherwise it is the value of the INVESTMENT (which frequently, but not always is the "cost basis") that is the basis of an IRR calculation.