Entering stock transactions

[Fred Bone]

On 08 September 2008 at 9:37, Charles Day said:

> On Mon, Sep 8, 2008 at 1:20 AM, Fred Bone <Fred.Bone at dial.pipex.com>
> wrote:
> 
> > I'm struggling to work out how to enter some complex stock transactions.
> > Can anyone help? Note that I'm not looking for "accountancy" or "tax"
> > advice; I'm trying to work out how to satisfy the balancing rules (and
> > so prevent spurious trial-balance errors).
> >
> > This example is probably as good as any:
> >
> > I bought 225 UU for 1473.59 plus 19.87 total dealing costs. So far so
> > good.
> >
> > Subsequently there was a capital reorganisation.
> > 17 new "A" shares for every 22 old, plus a 1-for-1 issue of "B" shares,
> > redeemable at 1.70 each. So I received 173 (= 225*17/22) new "A" shares,
> > plus 6.13 in cash for the odd 19/22 of a share, plus 382.50 (= 225*1.70)
> > in cash on redeeming the "B" shares.
> >
> > (There are no dealing costs).
> >
> 
> 
> >
> > I initially entered this transaction using the "Stock Split" Wizard, and
> > it shows as a "Split" of -52 shares, with two "Sell" splits, one of
> > 382.50 and the other of 6.13, and one "Buy" split of 388.63 Capital
> > Gains.
> >
> > Is this "the GnuCash way" to do it? Or should I work out the implied
> > value of a share (given that 19/22 was worth 6.13, that's 7.098 per
> > share) and treat it as two transactions: a sale of the original 225 (for
> > 225*7.098 = 1597.05) and a purchase of 173 (for 1597.05 - 388.63 =
> > 1208.42, implying a price of 6.9851)? In the latter case would it be
> > better to close off the register and start another with the "second
> 
> half"?
> >
> >
> It seems like you have two steps here:
> 1. 225 share UU -----> 173 "A" + 225 "B" + 6.13 cash
> 2. Sell 225 "B" @ 1.70 per share
> 
> However, the stock split druid doesn't know how to handle situations where
> one share of old stock gets split into two different new stocks. So I'm
> not sure the stock split druid is much help.
> 
> Did you receive any information about the reorganisation telling you about
> treatment of basis, cash, or capital gains?  What portion of the basis
> (1473.59 plus 19.87) goes to "A" shares and what portion goes to "B"
> shares? You need to know the basis of the "B" shares to figure the capital
> gains on redeeming them. Is any of the cash considered a return of capital
> rather than a capital gain?

Thanks for your response.

The announced purpose was to return cash to the shareholders. 
Consequently, I suppose the redemption of "B" shares constitutes return 
of capital (though I'm a bit hazy on the terminology). I've currently 
recorded it as capital gain, but I suspect this is wrong; however, where 
else could I put it?

BTW, and if it matters, there are no tax implications because the holding 
is in a tax-exempt wrapper. What I'm trying to do is eliminate an 
imbalance in the Trial Balance - this is only one of several roughly 
similar issues which I hope account between them for all the imbalance.