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Venture Capital Entries

Harensjm

Subject: How to correctly record SPV distributions of pre-IPO SpaceX shares in Quicken

I am seeking advice on how to correctly record distributions from a Special Purpose Vehicle (SPV) fund in Quicken. Here is my situation (the numbers are fictitious, but the ratios are about right):

I initially invested $10,000 in an SPV, which is held as a security in my Fidelity account. It reflects this investment at 10,000 shares at $1.00 per share. Since the SpaceX IPO about 6 months ago, I have received three separate distributions of SpaceX (SPCX) shares from the SPV into my Fidelity account. Each of the three "distributions" appear in my Fidelity account as 2 separate transactions.

One is reflected as an add into my Fidelity account of a specific number of SpaceX shares. This is hown as a "cash" transaction.
The second transaction is reflected as a "conversion in kind" of the SPV investment where the shares in the SPV are reduced by the value of the SpaceX shares issued. For example, if I get 2 shares of the SpaceX worth $150 per share, the SPV holding is reduced by 300 shares and goes from 10,000 shares to 9,700 shares.

To date, I have received 30 shares of SPCX and my SPV has gone from 10,000 shares @ $1 per share to about 5,500 shares @ $1 per share.

I am unsure how to properly reflect these transactions in Quicken to ensure the cost basis for both the new SPCX shares and the remaining SPV holdings remains accurate. My Fidelity account transaction history for these distributions appears inconsistent.

Could you please advise on the correct approach? Specifically, should I be using "Return of Capital," "Remove Shares," "Stock Split," or "Corporate Spin-off" or something else (e.g., add shares/remove shares)? I would appreciate guidance that maintains the correct cost basis for both the distributed shares and the remaining SPV shares for future gain/loss calculations.

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Comments

Sceptic

@Harensjm this is a bit outside the typical Quicken transaction question, but my first thought would be to use Fidelity's transaction history and records as the guide. I would look at how Fidelity is reflecting both the remaining SPV position and the distributed SpaceX shares, including any cost basis information that Fidelity provides.

Rather than focusing immediately on whether the Quicken transaction should be entered as a Spin-off, Return of Capital, or something else, I would try to make Quicken match the share balances and cost basis that Fidelity is reporting. Once you know how Fidelity is allocating the basis between the SPV and the distributed shares, it should be easier to determine which Quicken transaction type best reproduces those results.

Since future gain/loss calculations may depend on the basis allocation, you may also want to review any documentation provided by the SPV sponsor or consult a tax professional if the treatment is unclear.

Hopefully this gives you a starting point for evaluating the transactions in Quicken. Given the complexity of SPV distributions and basis allocation, I'll leave the finer points to others who may have direct experience with these types of investments.

q_lurker

I agree with @Sceptic that you really need to know the status (basis and acquisition date) of the SPCX. It would seem (per your simplified data) you now have 2 lots of SPCX totaling 30 shares at $4500 basis. But is that 10 and 20 shares at a basis of $2000 and $2500? And is the acquisition date the same as you bought the SPV shares, or dates the shares were converted.

Beyond that, however, the only practical way I can see for these transactions would be Remove and Add. On each applicable date, Remove Shares of the SPV and Add Shares of SPCX with an equal basis to the removed shares and the applicable acquisition date. Spinoff, Corp Acquisition, StkSplit, RtrnCap - none of them would do what you need individually and any combination becomes (IMO) cumbersome.

Hope this helps