Fw: Handling a Stock Spin Off

[Mke C.]

On 9/20/2010 12:40 AM, David T. wrote:
> I have tried what I proposed, and ended up doing something slightly different. I am still not sure it's right. Here is what I ended up with:
>
> Sell 200 DISH @ original cost (reducing cost basis to 0)
> Buy  200 DISH @ 82% * original cost (setting basis at 82% of original)
> Buy   40 SATS @ $1.82 (setting SATS basis at 18% of original basis)
>
> This sequence results in the cost basis remaining the same, although it does not set the SATS transaction at the company's share price of $35.
>
> Again I ask: did I do this right?
>
> TIA,
> David
>
> --- On Fri, 9/17/10, David T.<sunfish62 at yahoo.com>  wrote:
>
>    
>> From: David T.<sunfish62 at yahoo.com>
>> Subject: Fw: Handling a Stock Spin Off
>> To: "Users Gnucash"<gnucash-user at gnucash.org>
>> Date: Friday, September 17, 2010, 5:16 PM
>> Any comments?
>>
>> --- On Tue, 9/14/10, David T.<sunfish62 at yahoo.com>
>> wrote:
>>
>>      
>>> From: David T.<sunfish62 at yahoo.com>
>>> Subject: Handling a Stock Spin Off
>>> To: "Users Gnucash"<gnucash-user at gnucash.org>
>>> Date: Tuesday, September 14, 2010, 1:22 PM
>>> I am trying to get my brain around
>>> the transactions and splits needed to track a stock
>>>        
>> spin
>>      
>>> off. Back in January of 2008 (how ever did I miss it
>>>        
>> for so
>>      
>>> long!), DISH spun off SATS 5 to 1 (that is, for every
>>>        
>> share
>>      
>>> of DISH, I received .2 shares of SATS). According to
>>>        
>> one
>>      
>>> site I found, these are the data points I need to
>>>        
>> consider:
>>      
>>> 1. Spinoff date - 1/1/2008
>>> 2. Parent company - EchoStar Communications
>>>        
>> Corporation
>>      
>>> [DISH]
>>> 3. Remaining basis percentage of Parent Company,
>>>        
>> [DISH] -
>>      
>>> 82.5610.
>>> 4. Number of shares held in parent company - 200.
>>> 5. Daughter company - EchoStar Holding Corporation
>>>        
>> [SATS]
>>      
>>> 6. Number of shares of SATS received - 40.
>>> 7. Price per share of daughter company - $35.
>>>
>>> I am not entirely sure how I should be tracking this
>>>        
>> in
>>      
>>> GnuCash. A MoneyDance forum gives the following
>>> (MoneyDance-centric) set of instructions:
>>>
>>> 1, Leave the original purchase entry alone
>>> 2, Do a SellXfr of the original shares at $0 dollar
>>>        
>> amount
>>      
>>> (I created a special category "Stock Spinoff" to
>>>        
>> account for
>>      
>>> the double-entry required)
>>> 3, Do a BuyXfr to record acquiring the new parent
>>>        
>> shares at
>>      
>>> the published adjust cost basis (as per company press
>>> release) of the original share price on the spin-off
>>>        
>> date
>>      
>>> 4, Do a BuyXfr to record acquiring the new child
>>>        
>> shares at
>>      
>>> the published adjust cost basis (as per company press
>>> release) of the original share price on the spin-off
>>>        
>> date
>>      
>>> What I *think* all this means is:
>>> Sell 200 DISH @ $0 to Equity:Asset Cost
>>> Buy 200 DISH @ .82561 * 2.09635 [my orig purch price]
>>>        
>> from
>>      
>>> Equity:Asset Cost
>>> Buy 40 SATS @ $35 from Equity:Asset Cost
>>>
>>> FYI: Equity:Asset Cost is the account that the shares
>>>        
>> came
>>      
>>> from originally.
>>>
>>> Is this correct?
>>>
>>> Thanks,
>>> David
>>>
>>>
>>>
>>>
>>>        
>>
>>       
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>>      
>
I agree with your numbers but I would add that the date of the transaction would be the original purchase date of Dish for tax purposes.  I couldn't find any way in GC to just reduce the cost basis of the stock without selling it.  If there is a way, that is the best solution.

Mike
>
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