spin off
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From: Ira Smilovitz on 12 Apr 2008 18:06 "TomYoung" <tgyoung(a)yahoo.com> wrote in message news:e1e87fd5-8ead-46de-b329-221057c1e484(a)1g2000prf.googlegroups.com... > 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 No. If you buy a pizza pie, take away 2 slices and call those two slices a tomato pastry, it doesn't change anything. Those two slices were part of the original pizza, you still own the whole thing and you acquired both parts (the remaining 6 slices and the tomato pastry) when you bought the pizza. Ira Smilovitz
From: R. C. White on 12 Apr 2008 21:39 Hi, Ira. If you bought 100 shares of BIG Corp. on 1/1/99 for $10 per share and it was worth $20 per share by November 30, 2006, your 11/30/06 financial statement would show 100 BIG, cost $1,000. The $2,000 current market value would not appear in statements prepared on the cost basis in accordance with GAAP (Generally Accepted Accounting Principles). Your 6/30/06 statement would also show - correctly - that you held 100 BIG at a cost of $1,000 as of that date. If BIG spins off assets of one of its businesses into a new corporation called SPUN on 12/15/06, and you get 20 shares of SPUN, then by December 31, you will have 100 shares of BIG AND 20 shares of SPUN. You would have allocated your $1,000 basis to the new shares based on the ratio of FMV of BIG and SPUN on 12/15/06, immediately after the spin-off. If BIG shares sold for $17 each after BIG no longer owned the SPUN assets, and if the first sales of SPUN's new shares were at $15 each, then the 100 BIG that you still own would be worth a total of $1,700 and the 20 shares of SPUN that you received would be worth a total of $300. The total value of your BIG and SPUN would still be $2,000. You would allocate 1700/2000 of your original $1,000 basis to your 100 BIG, reducing your basis to $8.50 per share, total $850. Your SPUN basis would be 300/2000 of $1,000, or $150, or $7.50 for each of your 20 shares. Your total basis in all your shares would still be $1,000 ($850 + $150). Now, if your accountant prepares a financial statement for you as of 11/30/06, it should show that you owned 100 shares of BIG at a cost of $1,000. But if Quicken prepares that statement, it will show that you owned 100 BIG at a cost of $850 and 20 SPUN at a cost of $150. Which is patently wrong because SPUN did not exist on 11/30/06. In fact, if Quicken prepares a financial statement for any date between 1/1/99 and 12/15/06, it will be wrong because it will report that you owned shares of a non-existent company. Your total cost will be correct, but the components will be wrong. Even if we switch from GAAP to market values for any of those interim financial statements, we will still have a problem. It will still show that we owned both BIG and SPUN shares on that date. How will we show the market value of our 20 shares of SPUN on 6/30/06? We won't be able to find quotes for SPUN on that date because no such shares were for sale back then. I suppose we could show 20 shares at zero value, but that would look kind of awkward. THAT is the problem that we wish Intuit's programmers would fix! 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) "Ira Smilovitz" <iras1(a)aol.com> wrote in message news:4801326d$0$7685$4c368faf(a)roadrunner.com... > > "TomYoung" <tgyoung(a)yahoo.com> wrote in message > news:e1e87fd5-8ead-46de-b329-221057c1e484(a)1g2000prf.googlegroups.com... >> 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 > > No. If you buy a pizza pie, take away 2 slices and call those two slices > a tomato pastry, it doesn't change anything. Those two slices were part of > the original pizza, you still own the whole thing and you acquired both > parts (the remaining 6 slices and the tomato pastry) when you bought the > pizza. > > Ira Smilovitz
From: Ira Smilovitz on 15 Apr 2008 01:06 "R. C. White" <rc(a)grandecom.net> wrote in message news:oOOdnXUNP9j1-ZzVnZ2dnUVZ_rKtnZ2d(a)grandecom... > Hi, Ira. > > If you bought 100 shares of BIG Corp. on 1/1/99 for $10 per share and it > was worth $20 per share by November 30, 2006, your 11/30/06 financial > statement would show 100 BIG, cost $1,000. The $2,000 current market > value would not appear in statements prepared on the cost basis in > accordance with GAAP (Generally Accepted Accounting Principles). Your > 6/30/06 statement would also show - correctly - that you held 100 BIG at a > cost of $1,000 as of that date. > > If BIG spins off assets of one of its businesses into a new corporation > called SPUN on 12/15/06, and you get 20 shares of SPUN, then by December > 31, you will have 100 shares of BIG AND 20 shares of SPUN. You would have > allocated your $1,000 basis to the new shares based on the ratio of FMV of > BIG and SPUN on 12/15/06, immediately after the spin-off. If BIG shares > sold for $17 each after BIG no longer owned the SPUN assets, and if the > first sales of SPUN's new shares were at $15 each, then the 100 BIG that > you still own would be worth a total of $1,700 and the 20 shares of SPUN > that you received would be worth a total of $300. The total value of your > BIG and SPUN would still be $2,000. You would allocate 1700/2000 of your > original $1,000 basis to your 100 BIG, reducing your basis to $8.50 per > share, total $850. Your SPUN basis would be 300/2000 of $1,000, or $150, > or $7.50 for each of your 20 shares. Your total basis in all your shares > would still be $1,000 ($850 + $150). > > Now, if your accountant prepares a financial statement for you as of > 11/30/06, it should show that you owned 100 shares of BIG at a cost of > $1,000. But if Quicken prepares that statement, it will show that you > owned 100 BIG at a cost of $850 and 20 SPUN at a cost of $150. Which is > patently wrong because SPUN did not exist on 11/30/06. In fact, if > Quicken prepares a financial statement for any date between 1/1/99 and > 12/15/06, it will be wrong because it will report that you owned shares of > a non-existent company. Your total cost will be correct, but the > components will be wrong. > > Even if we switch from GAAP to market values for any of those interim > financial statements, we will still have a problem. It will still show > that we owned both BIG and SPUN shares on that date. How will we show the > market value of our 20 shares of SPUN on 6/30/06? We won't be able to > find quotes for SPUN on that date because no such shares were for sale > back then. I suppose we could show 20 shares at zero value, but that > would look kind of awkward. > > THAT is the problem that we wish Intuit's programmers would fix! > > RC I guess I must have misunderstood part of the original post. I agree with you that if you run a financial report as of a date before the spinoff, you shouldn't see the spinoff company listed as a separate asset. I thought the discussion was about how to reflect the ownership period of the spunoff company. Thank you for taking the time to explain. Ira Smilovitz
From: TomYoung on 15 Apr 2008 11:40 On Apr 14, 10:06 pm, "Ira Smilovitz" <ir...(a)aol.com> wrote: > "R. C. White" <r...(a)grandecom.net> wrote in messagenews:oOOdnXUNP9j1-ZzVnZ2dnUVZ_rKtnZ2d(a)grandecom... > > > > > Hi, Ira. > > > If you bought 100 shares of BIG Corp. on 1/1/99 for $10 per share and it > > was worth $20 per share by November 30, 2006, your 11/30/06 financial > > statement would show 100 BIG, cost $1,000. The $2,000 current market > > value would not appear in statements prepared on the cost basis in > > accordance with GAAP (Generally Accepted Accounting Principles). Your > > 6/30/06 statement would also show - correctly - that you held 100 BIG at a > > cost of $1,000 as of that date. > > > If BIG spins off assets of one of its businesses into a new corporation > > called SPUN on 12/15/06, and you get 20 shares of SPUN, then by December > > 31, you will have 100 shares of BIG AND 20 shares of SPUN. You would have > > allocated your $1,000 basis to the new shares based on the ratio of FMV of > > BIG and SPUN on 12/15/06, immediately after the spin-off. If BIG shares > > sold for $17 each after BIG no longer owned the SPUN assets, and if the > > first sales of SPUN's new shares were at $15 each, then the 100 BIG that > > you still own would be worth a total of $1,700 and the 20 shares of SPUN > > that you received would be worth a total of $300. The total value of your > > BIG and SPUN would still be $2,000. You would allocate 1700/2000 of your > > original $1,000 basis to your 100 BIG, reducing your basis to $8.50 per > > share, total $850. Your SPUN basis would be 300/2000 of $1,000, or $150, > > or $7.50 for each of your 20 shares. Your total basis in all your shares > > would still be $1,000 ($850 + $150). > > > Now, if your accountant prepares a financial statement for you as of > > 11/30/06, it should show that you owned 100 shares of BIG at a cost of > > $1,000. But if Quicken prepares that statement, it will show that you > > owned 100 BIG at a cost of $850 and 20 SPUN at a cost of $150. Which is > > patently wrong because SPUN did not exist on 11/30/06. In fact, if > > Quicken prepares a financial statement for any date between 1/1/99 and > > 12/15/06, it will be wrong because it will report that you owned shares of > > a non-existent company. Your total cost will be correct, but the > > components will be wrong. > > > Even if we switch from GAAP to market values for any of those interim > > financial statements, we will still have a problem. It will still show > > that we owned both BIG and SPUN shares on that date. How will we show the > > market value of our 20 shares of SPUN on 6/30/06? We won't be able to > > find quotes for SPUN on that date because no such shares were for sale > > back then. I suppose we could show 20 shares at zero value, but that > > would look kind of awkward. > > > THAT is the problem that we wish Intuit's programmers would fix! > > > RC > > I guess I must have misunderstood part of the original post. I agree with > you that if you run a financial report as of a date before the spinoff, you > shouldn't see the spinoff company listed as a separate asset. I thought the > discussion was about how to reflect the ownership period of the spunoff > company. > > Thank you for taking the time to explain. > > Ira Smilovitz And, of course, the way Quicken currently works can produce even worse results if SPUN happened to be a public company all along. (That is, BIG owned a minority share of the pre-existing public company SPUN, but you only owned BIG shares.) In that case if you produced Quicken financial statements as of 11/30/06 and asked Quicken to include unrealized gains Quicken would report you owned *both* BIG and SPUN as of that date, both potentially with market values as of that date, overstating your unrealized gains. (I say "potentially" because you'd need a market value as of that date for SPUN. But, it you happened to be following SPUN all along on a "watch" list, or without thinking about it asked Quicken to download historical quotes for SPUN for a time period that included dates before the spin-off, SPUN's share price would be available for the report.) Tom Young
From: Oilcan on 15 Apr 2008 22:05
Quicken allows you to create two securities and use the same quote symbol. I have to do this for the company that I work for in the 401K - two funds in the same account basically invested in my company's shares and some shares I own outside of the company. Each of these has a unique name. You could possibly do this with a spin off - for example if you owned Del Monte prior to the Heinz divesting of some businesses. Oilcan -----Original Message----- From: TomYoung [mailto:tgyoung(a)yahoo.com] Posted At: Tuesday, April 15, 2008 8:40 AM Posted To: alt.comp.software.financial.quicken Conversation: spin off Subject: Re: spin off On Apr 14, 10:06 pm, "Ira Smilovitz" <ir...(a)aol.com> wrote: > "R. C. White" <r...(a)grandecom.net> wrote in messagenews:oOOdnXUNP9j1-ZzVnZ2dnUVZ_rKtnZ2d(a)grandecom... > > > > > Hi, Ira. > > > If you bought 100 shares of BIG Corp. on 1/1/99 for $10 per share and it > > was worth $20 per share by November 30, 2006, your 11/30/06 financial > > statement would show 100 BIG, cost $1,000. The $2,000 current market > > value would not appear in statements prepared on the cost basis in > > accordance with GAAP (Generally Accepted Accounting Principles). Your > > 6/30/06 statement would also show - correctly - that you held 100 BIG at a > > cost of $1,000 as of that date. > > > If BIG spins off assets of one of its businesses into a new corporation > > called SPUN on 12/15/06, and you get 20 shares of SPUN, then by December > > 31, you will have 100 shares of BIG AND 20 shares of SPUN. You would have > > allocated your $1,000 basis to the new shares based on the ratio of FMV of > > BIG and SPUN on 12/15/06, immediately after the spin-off. If BIG shares > > sold for $17 each after BIG no longer owned the SPUN assets, and if the > > first sales of SPUN's new shares were at $15 each, then the 100 BIG that > > you still own would be worth a total of $1,700 and the 20 shares of SPUN > > that you received would be worth a total of $300. The total value of your > > BIG and SPUN would still be $2,000. You would allocate 1700/2000 of your > > original $1,000 basis to your 100 BIG, reducing your basis to $8.50 per > > share, total $850. Your SPUN basis would be 300/2000 of $1,000, or $150, > > or $7.50 for each of your 20 shares. Your total basis in all your shares > > would still be $1,000 ($850 + $150). > > > Now, if your accountant prepares a financial statement for you as of > > 11/30/06, it should show that you owned 100 shares of BIG at a cost of > > $1,000. But if Quicken prepares that statement, it will show that you > > owned 100 BIG at a cost of $850 and 20 SPUN at a cost of $150. Which is > > patently wrong because SPUN did not exist on 11/30/06. In fact, if > > Quicken prepares a financial statement for any date between 1/1/99 and > > 12/15/06, it will be wrong because it will report that you owned shares of > > a non-existent company. Your total cost will be correct, but the > > components will be wrong. > > > Even if we switch from GAAP to market values for any of those interim > > financial statements, we will still have a problem. It will still show > > that we owned both BIG and SPUN shares on that date. How will we show the > > market value of our 20 shares of SPUN on 6/30/06? We won't be able to > > find quotes for SPUN on that date because no such shares were for sale > > back then. I suppose we could show 20 shares at zero value, but that > > would look kind of awkward. > > > THAT is the problem that we wish Intuit's programmers would fix! > > > RC > > I guess I must have misunderstood part of the original post. I agree with > you that if you run a financial report as of a date before the spinoff, you > shouldn't see the spinoff company listed as a separate asset. I thought the > discussion was about how to reflect the ownership period of the spunoff > company. > > Thank you for taking the time to explain. > > Ira Smilovitz And, of course, the way Quicken currently works can produce even worse results if SPUN happened to be a public company all along. (That is, BIG owned a minority share of the pre-existing public company SPUN, but you only owned BIG shares.) In that case if you produced Quicken financial statements as of 11/30/06 and asked Quicken to include unrealized gains Quicken would report you owned *both* BIG and SPUN as of that date, both potentially with market values as of that date, overstating your unrealized gains. (I say "potentially" because you'd need a market value as of that date for SPUN. But, it you happened to be following SPUN all along on a "watch" list, or without thinking about it asked Quicken to download historical quotes for SPUN for a time period that included dates before the spin-off, SPUN's share price would be available for the report.) Tom Young |