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From: R. C. White on 11 Apr 2008 17:12
Hi, Tom.

> I have to disagree with that last sentence.

You wouldn't disagree if I had worded it better... ;^}

>> Just remember to watch out for this tax code provision which can't easily
>> be
>> handled in a program like Quicken.

I should have said that the conflicting date problem can't be handled easily
in Quicken by us mere users.

I haven't done any programming since about GW Basic (early 1990's?) and I'm
sure I could not improve Intuit's code. But, like you, I would expect that
Intuit's programmers are entirely capable of working out the solution, given
enough time and motivation. As John said, Intuit no doubt has its own
priority list and the problems of reconciling tax rules with The Real World
are apparently not high on that list. Surely they could at least change the
word "cost" to "fair market value' in that spin-off wizard, though!

The real problem, of course, is that Congress intentionally created this
fiction that the spun-off shares were acquired on the date that the parent
shares were acquired. That is true in a way, but not in a way that can
easily be recorded in an accountant's set of books - or in Quicken. That
provision usually benefits taxpayers by letting the new shares qualify for
long-term capital gain treatment much sooner than if the holding period for
the new shares began on the date of the spin-off.

But there are many tax provisions that cannot be reflected in the accounting
records. The most glaring, I suppose, is the personal exemption. There is
just no good way to make an accounting entry for that. And the Standard
Deduction is about as bad. Not to mention trying to account for the (7.5%
of AGI) "threshold" for medical deductions. For all these provisions that
vary from accounting theory and practice, about all we can do is keep good
memo records so that we can reconcile tax rules with accounting rules.

And, for us mere users, there is just no way that I know to make our Quicken
records accurately reflect both the real world and the tax fictions,
including the one about pre-spin-off holdings of spun-off shares.

I'm sorry I didn't make my meaning clear in my first message, Tom. It
reminds me of a quote I saw long ago in The CPA Handbook. It said something
like, "It is important to write so that you can be understood. But it is
even more important to write so that you cannot possibly be misunderstood."

RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc(a)grandecom.net
Microsoft Windows MVP
(Currently running Quicken 2008 Deluxe in Vista Ultimate x64 SP1)

"TomYoung" <tgyoung(a)yahoo.com> wrote in message
news:bd9a9409-ac27-4e63-aa76-046355dabe19(a)y18g2000pre.googlegroups.com...
> On Apr 8, 9:24 am, "R. C. White" <r...(a)grandecom.net> wrote:
>
>
>> In Quicken, just follow the steps, making sure to enter the per-share
>> FMVs,
>> not the cost, of old and new shares, and Quicken should do the rest. If
>> you
>> held multiple lots of old shares, Quicken will adjust each of them
>> automatically. The only caveat is that, if you look back to a historical
>> point before the spin-off, you will see shares of a spun-off company that
>> didn't even exist at that time. This is because the tax rules treat the
>> new
>> shares as though they were acquired when the original shares were
>> acquired.
>> Just remember to watch out for this tax code provision which can't easily
>> be
>> handled in a program like Quicken.
>
> I have to disagree with that last sentence. A little bit of simple
> programming - I think - should allow Quicken to present a logical and
> correct result of a spin-off, i.e., correct basis allocation between
> old and new companies, correct tax acquisition dates for lots of new
> company stock, and the "appearance" of new company stock in Quicken's
> registers as of the date of the spin-off, not years before the new
> company existed as a stand-alone entity as Quicken does now. Maybe
> it's harder to do this programmatically then I'm anticipating it is,
> but I don't think so. The spin-off wizard has been a problem for
> years and I'm surprised Quicken has never addressed it.
>
> Tom Young

From: TomYoung on 11 Apr 2008 17:31
On Apr 11, 11:10 am, "John Pollard" <inva...(a)invalid.com> wrote:
> TomYoung wrote:
> > On Apr 8, 9:24 am, "R. C. White" <r...(a)grandecom.net> wrote:
>
> >> In Quicken, just follow the steps, making sure to enter the
> >> per-share FMVs, not the cost, of old and new shares, and
> >> Quicken
> >> should do the rest. If you held multiple lots of old shares,
> >> Quicken will adjust each of them automatically. The only
> >> caveat is
> >> that, if you look back to a historical point before the
> >> spin-off,
> >> you will see shares of a spun-off company that didn't even
> >> exist at
> >> that time. This is because the tax rules treat the new
> >> shares as
> >> though they were acquired when the original shares were
> >> acquired.
> >> Just remember to watch out for this tax code provision which
> >> can't
> >> easily be handled in a program like Quicken.
> > I have to disagree with that last sentence. A little bit of
> > simple
> > programming - I think - should allow Quicken to present a
> > logical and
> > correct result of a spin-off, i.e., correct basis allocation
> > between
> > old and new companies, correct tax acquisition dates for lots
> > of new
> > company stock, and the "appearance" of new company stock in
> > Quicken's
> > registers as of the date of the spin-off, not years before the
> > new
> > company existed as a stand-alone entity as Quicken does now.
> > Maybe
> > it's harder to do this programmatically then I'm anticipating
> > it is,
> > but I don't think so. The spin-off wizard has been a problem
> > for
> > years and I'm surprised Quicken has never addressed it.
>
> I suspect it's more a question of the relative net benefit of
> making the change. There is undoubtedly a long list of "things
> to do" for Quicken; Intuit isn't stupid, so they probably weigh
> the costs and benefits of each of the items on that list and act
> accordingly. Virtually none of the information required to
> determine what's in the to-list, the cost, the benefit, and the
> relative position of the net-benefit on the to-do list, is
> available to anyone outside Intuit. But Quicken's market share
> indicates that Intuit does a pretty good job deciding what to
> put in and what to leave out.
>
> Still, users aren't stuck with Quicken's output for a spinoff:
> you can change the results so the ownership of the new security
> begins on the date of the spinoff and the cost
> basis/acquisition-dates remain correct.
>
> Modify the "Buy" transactions to be "Shares Added" transactions,
> with the date purchased in the "Date Acquired" field and the
> cost in the "Total cost" field, and change the transaction date
> to the date of the spinoff. [When you change the transaction
> from Buy to Shares Added, Quicken should fill in the fields for
> you; the only "change" needed should be the transaction date.]
>
> Then, since there are no longer any Buy transactions to soak up
> the cash from the return-of-capital transactions, change those
> RtrnCap transactions to "transfer" the cash to the same account
> where the return-of-capital transactions are entered.

However, there appear to be bugs in this wizard beyond what I'll call
the "style issues" you've discussed; I mentioned a problem back in
2002 where Old Stock Basis After Spin-off + New Stock Basis didn't
equal Old Stock Basis Before Spin-off, (maybe Quicken fixed this,
don't know), and more recently somebody over in the users group at
Quicken.com indicated that although basis *was* allocated properly in
a spin-off *in total* it wasn't allocated correctly among lots. So
Quicken's spin-off wizard certainly has delivered and continues to
deliver wrong answers that are wrong accounting-wise, not wrong merely
as a matter of style or logic.

You are correct that Quicken probably does approach issues like this
on a cost/benefit basis, however their near-monopoly in the personal
finance arena doesn't give them much incentive to fix problems like
the spin-off wizard, an issue that flies below the radar of most
users.

Tom Young
From: Ira Smilovitz on 11 Apr 2008 23:50

"TomYoung" <tgyoung(a)yahoo.com> wrote in message
news:bd9a9409-ac27-4e63-aa76-046355dabe19(a)y18g2000pre.googlegroups.com...
> On Apr 8, 9:24 am, "R. C. White" <r...(a)grandecom.net> wrote:
>
>
>> In Quicken, just follow the steps, making sure to enter the per-share
>> FMVs,
>> not the cost, of old and new shares, and Quicken should do the rest. If
>> you
>> held multiple lots of old shares, Quicken will adjust each of them
>> automatically. The only caveat is that, if you look back to a historical
>> point before the spin-off, you will see shares of a spun-off company that
>> didn't even exist at that time. This is because the tax rules treat the
>> new
>> shares as though they were acquired when the original shares were
>> acquired.
>> Just remember to watch out for this tax code provision which can't easily
>> be
>> handled in a program like Quicken.
>
> I have to disagree with that last sentence. A little bit of simple
> programming - I think - should allow Quicken to present a logical and
> correct result of a spin-off, i.e., correct basis allocation between
> old and new companies, correct tax acquisition dates for lots of new
> company stock, and the "appearance" of new company stock in Quicken's
> registers as of the date of the spin-off, not years before the new
> company existed as a stand-alone entity as Quicken does now. Maybe
> it's harder to do this programmatically then I'm anticipating it is,
> but I don't think so. The spin-off wizard has been a problem for
> years and I'm surprised Quicken has never addressed it.
>
> Tom Young

It hasn't been addressed because your solution is wrong. Quicken does it
correctly as it is. The spinoff shares are "acquired" on the same date as
the original shares, not on the date the new shares first trade.

Ira Smilovitz


From: D. Blair Favrot on 12 Apr 2008 11:24
Well I kindof surmised then may be no easy answer but appreciate the various
comments.

Blair

Ira Smilovitz wrote:

> "TomYoung" <tgyoung(a)yahoo.com> wrote in message
> news:bd9a9409-ac27-4e63-aa76-046355dabe19(a)y18g2000pre.googlegroups.com...
> > On Apr 8, 9:24 am, "R. C. White" <r...(a)grandecom.net> wrote:
> >
> >
> >> In Quicken, just follow the steps, making sure to enter the per-share
> >> FMVs,
> >> not the cost, of old and new shares, and Quicken should do the rest. If
> >> you
> >> held multiple lots of old shares, Quicken will adjust each of them
> >> automatically. The only caveat is that, if you look back to a historical
> >> point before the spin-off, you will see shares of a spun-off company that
> >> didn't even exist at that time. This is because the tax rules treat the
> >> new
> >> shares as though they were acquired when the original shares were
> >> acquired.
> >> Just remember to watch out for this tax code provision which can't easily
> >> be
> >> handled in a program like Quicken.
> >
> > I have to disagree with that last sentence. A little bit of simple
> > programming - I think - should allow Quicken to present a logical and
> > correct result of a spin-off, i.e., correct basis allocation between
> > old and new companies, correct tax acquisition dates for lots of new
> > company stock, and the "appearance" of new company stock in Quicken's
> > registers as of the date of the spin-off, not years before the new
> > company existed as a stand-alone entity as Quicken does now. Maybe
> > it's harder to do this programmatically then I'm anticipating it is,
> > but I don't think so. The spin-off wizard has been a problem for
> > years and I'm surprised Quicken has never addressed it.
> >
> > Tom Young
>
> It hasn't been addressed because your solution is wrong. Quicken does it
> correctly as it is. The spinoff shares are "acquired" on the same date as
> the original shares, not on the date the new shares first trade.
>
> Ira Smilovitz

From: TomYoung on 12 Apr 2008 12:21
On Apr 11, 8:50 pm, "Ira Smilovitz" <ir...(a)aol.com> wrote:
> "TomYoung" <tgyo...(a)yahoo.com> wrote in message
>
> news:bd9a9409-ac27-4e63-aa76-046355dabe19(a)y18g2000pre.googlegroups.com...
>
>
>
> > On Apr 8, 9:24 am, "R. C. White" <r...(a)grandecom.net> wrote:
>
> >> In Quicken, just follow the steps, making sure to enter the per-share
> >> FMVs,
> >> not the cost, of old and new shares, and Quicken should do the rest. If
> >> you
> >> held multiple lots of old shares, Quicken will adjust each of them
> >> automatically. The only caveat is that, if you look back to a historical
> >> point before the spin-off, you will see shares of a spun-off company that
> >> didn't even exist at that time. This is because the tax rules treat the
> >> new
> >> shares as though they were acquired when the original shares were
> >> acquired.
> >> Just remember to watch out for this tax code provision which can't easily
> >> be
> >> handled in a program like Quicken.
>
> > I have to disagree with that last sentence. A little bit of simple
> > programming - I think - should allow Quicken to present a logical and
> > correct result of a spin-off, i.e., correct basis allocation between
> > old and new companies, correct tax acquisition dates for lots of new
> > company stock, and the "appearance" of new company stock in Quicken's
> > registers as of the date of the spin-off, not years before the new
> > company existed as a stand-alone entity as Quicken does now. Maybe
> > it's harder to do this programmatically then I'm anticipating it is,
> > but I don't think so. The spin-off wizard has been a problem for
> > years and I'm surprised Quicken has never addressed it.
>
> > Tom Young
>
> It hasn't been addressed because your solution is wrong. Quicken does it
> correctly as it is. The spinoff shares are "acquired" on the same date as
> the original shares, not on the date the new shares first trade.
>
No, they are acquired on the date of the spin-off because they didn't
exist in your portfolio before that and Quicken's presentation in that
manner is pure fiction. For tax purposes, and only for tax purposes,
they are considered to be acquired "way back when" but reality and tax
law don't have much in common.

Quicken has a separate field called the "date acquired" field, not the
same as the "transaction date" field, that can and should be used as
part of their programming of the wizard to maintain the one date for
tax purposes and the other date to reflect the reality of the spin-
off.

As JP has said, Quicken hasn't fixed this because their cost/benefit
calculation hasn't motivated them to do so.

Tom Young
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