How to allocate basis of Honeywell and Resideo?
Options
Jeffrey Kirk
Member ✭✭✭
I owned 7 shares of Honeywell in a Fidelity managed account with a basis (cost) of $1,088.48 in October 2018.
As a result of the Resideo spinoff from Honeywell in October 2018, I received 1 share of Resideo stock and $3.26 in cash (in lieu of a fractional share of Resideo.
My understanding of the terms of the spinoff are: I would receive 1 share (or fraction thereof) of Resideo stock for every 6 shares of Honeywell I owned. In addition, the Honeywell stock basis would be allocated between the Honeywell and Resideo stock (including any fractional shares) post-spinoff based on the weighted average price of each stock on the date of the spinoff.
On my October Fidelity statement, it shows an end of month basis of the 7 shares of my Honeywell stock of $1,056.26, and a basis of my 1 share of Resideo stock of $27.61. In addition, it also shows a basis in the fractional share for which I received the $3.26 of $4.61.
According to an illustrative IRS Form 8937 issued by Honeywell (?), my basis of $1088.48 in my Honeywell stock pre-spinoff should be allocated to the Honeywell and Resideo stock post spinoff based on the weighted average price of each of the company's stock as of the date of the spinoff, or 97.08165% to Honeywell and 2.9184% to Resideo. When I apply these percentages to the $1,088.48 basis of my Honeywell stock pre-spinoff, I do not come up with the $1,056.26 or $27.61 bases of the Honeywell and Resideo stock post-spinoff, as per Fidelity.
What I would like to know is (1) how these basis numbers were computed, and (2) how do I enter the results in Quicken.
Thanks in advance.
As a result of the Resideo spinoff from Honeywell in October 2018, I received 1 share of Resideo stock and $3.26 in cash (in lieu of a fractional share of Resideo.
My understanding of the terms of the spinoff are: I would receive 1 share (or fraction thereof) of Resideo stock for every 6 shares of Honeywell I owned. In addition, the Honeywell stock basis would be allocated between the Honeywell and Resideo stock (including any fractional shares) post-spinoff based on the weighted average price of each stock on the date of the spinoff.
On my October Fidelity statement, it shows an end of month basis of the 7 shares of my Honeywell stock of $1,056.26, and a basis of my 1 share of Resideo stock of $27.61. In addition, it also shows a basis in the fractional share for which I received the $3.26 of $4.61.
According to an illustrative IRS Form 8937 issued by Honeywell (?), my basis of $1088.48 in my Honeywell stock pre-spinoff should be allocated to the Honeywell and Resideo stock post spinoff based on the weighted average price of each of the company's stock as of the date of the spinoff, or 97.08165% to Honeywell and 2.9184% to Resideo. When I apply these percentages to the $1,088.48 basis of my Honeywell stock pre-spinoff, I do not come up with the $1,056.26 or $27.61 bases of the Honeywell and Resideo stock post-spinoff, as per Fidelity.
What I would like to know is (1) how these basis numbers were computed, and (2) how do I enter the results in Quicken.
Thanks in advance.
0
Best Answer
-
The Honeywell calc is as follows:
Immediately after the spinoff an investor who started with 6 HON shares would have had 6 HON shares valued at 143.06/share (858.36) and one REZI share valued at 25.80 for a total value of 884.16. The HON portion is 97.802% of that total; REZI is 2.198% (choose precision as desired). The same percentages apply regardless of the number of shares owned by the HON shareholder.
Your brokerage may have used values different from the 143.06 and 25.80 values Honeywell presented which would yield slightly different percentages.
In Quicken, you can use the Corporate Spinoff transaction with the applicable share ratio (0.166667) and the applicable fair market values (143.06 and 25.80, or whatever other values you can justify).
In your case that would generate a
Remove Shares of HON 7 shares
Add Shares of HON 7 shares basis = 1088.48 * 0.97802 = 1064.56
Add Shares of REZI 1.166667 basis = 1088.48 * 0.02198 = 23.92
You would then sell the 0.166667 (match the actual fractional value) for the 3.26 cash in lieu received. (Basis on that sale would be 1/7 of the 22.17 = 3.42 for a $0.16 loss).
You can back-figure other fair market values that would yield the 1056.26 & 32.22 (27.61 + 4.61) values Fidelity shows, or you can more simply in your case edit the two generated Add Shares transactions to reflect the Fidelity generated values.
If you have transactions in your file already from a Fidelity download, you probably should delete them.
As always, venturing into uncharted territory -- MAKE A BACKUP first!5
Answers
-
The Honeywell calc is as follows:
Immediately after the spinoff an investor who started with 6 HON shares would have had 6 HON shares valued at 143.06/share (858.36) and one REZI share valued at 25.80 for a total value of 884.16. The HON portion is 97.802% of that total; REZI is 2.198% (choose precision as desired). The same percentages apply regardless of the number of shares owned by the HON shareholder.
Your brokerage may have used values different from the 143.06 and 25.80 values Honeywell presented which would yield slightly different percentages.
In Quicken, you can use the Corporate Spinoff transaction with the applicable share ratio (0.166667) and the applicable fair market values (143.06 and 25.80, or whatever other values you can justify).
In your case that would generate a
Remove Shares of HON 7 shares
Add Shares of HON 7 shares basis = 1088.48 * 0.97802 = 1064.56
Add Shares of REZI 1.166667 basis = 1088.48 * 0.02198 = 23.92
You would then sell the 0.166667 (match the actual fractional value) for the 3.26 cash in lieu received. (Basis on that sale would be 1/7 of the 22.17 = 3.42 for a $0.16 loss).
You can back-figure other fair market values that would yield the 1056.26 & 32.22 (27.61 + 4.61) values Fidelity shows, or you can more simply in your case edit the two generated Add Shares transactions to reflect the Fidelity generated values.
If you have transactions in your file already from a Fidelity download, you probably should delete them.
As always, venturing into uncharted territory -- MAKE A BACKUP first!5
This discussion has been closed.