How do I record the spin-off of Net Lease Office Properties (NLOP) from W.P. Carey (WPC)
Carey says it's a TAXABLE distribution of some assets to the new entity, effective November 1. Can I simply add the new security to Quicken and post a "Shares Added" transaction with the number of new shares? My shares in WPC did not change. Would I use the opening price on November 1 or the closing price?
Best Answer
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You can use any price you choose today, open, close, average, etc. Likely when Schwab does come up with their number, you would want to adjust yours to match.
Act now and change later.
Defer action until you have more info.
Your choice.
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Answers
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For a taxable transaction, you need to know the type of income that is taxable. In some cases it might be considered dividend income. In other cases, some other form. If dividend income, you can enter a Div transaction for the cash value of the NLOP shares (their basis). Otherwise, a MiscInc transaction is likely preferable. Contrary to the program's advice, I would then enter a Buy Shares of NLOP for that basis amount.
You really need to know the specifics to get it right, although I suspect you can come back later and redo it with later information if need be.
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Excerpts from Carey: "…a distribution of the outstanding common shares of beneficial interest of Net Lease Office Properties … Prior to the Distribution, WPC will contribute certain office properties to NLOP … Following the Separation and the Distribution, NLOP will be a publicly-traded real estate investment trust, with a portfolio of office properties previously owned by WPC … The Distribution is expected to occur on November 1, 2023, by way of a pro-rata special dividend to WPC common stockholders of record … The Distribution is intended to be a taxable distribution to such WPC stockholders for U.S. federal income tax purposes.
So, you're saying I should post a dividend payment from WPC for the value of the NLOP shares on Nov. 1, and then post a "Buy" of NLOP shares for that same amount - even though no cash changed hands? I guess that makes sense. What share price should I use to calculate the dividend; Nov. 1 close?
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Yes, that is what I am saying, further noting that Carey 'distributions' can carry a variety of tax categories with them - qualified, non-dividend distributions, cap gain, Sec. 1250, etc. You as a user might have taken a variety of ways to use that information.
What share price should I use to calculate the dividend; Nov. 1 close?
Are these shares held by a broker? Is their website for your account showing a basis (cost) for your NLOP shares? That would establish a fair market value per share for you to use.
I also note that this was a 1-for-15 spinoff. That is, if you had 100 shares of WPC, you would be due 6.666667 shares of NLOP. But you would only get 6 whole shares and you would get cash-in-lieu of the fractional 0.666667 shares. The cost basis value shown by your brokerage would only be for the whole 6 shares. To be rigorous with the accounting, you would determine the fair market value of the whole + fractional NLOP shares, take that amount as the 'dividend', buy the whole + fractional shares, the sell the fractional shares for the cash-in-lieu amount you separately receive in your brokerage account. You might have a small capital gain or loss on that sale of the fractional share.
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Luckily, I have 150 shares of WPC, which translates to 10 shares of NLOP. My Schwab account shows "Date: 11/02/2023 as of 11/01/2023; Action: Spin-off; Symbol: NLOP; Description: Net Lease Office PPTYS; Shares: 10" No price, no basis. That's why I'm asking.
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You can use any price you choose today, open, close, average, etc. Likely when Schwab does come up with their number, you would want to adjust yours to match.
Act now and change later.
Defer action until you have more info.
Your choice.
0