Fw: Handling a Stock Spin Off

[Tommy Trussell]

On Mon, Sep 20, 2010 at 10:22 PM, Mke C. <subscribe307 at verizon.net> wrote:
> 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.

...

> 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

One thing you might do to model such things is to look at the legal
documents the company sent ... in a lot of cases there is an
intermediate "shell" corporation involved, so even though you didn't
personally "sell" the shares, they were transferred among old and new
corporate entities, maybe even more than once. (And in the process you
the small shareholder probably lost value while the corporate
attorneys and others gained some liquid assets.) :-P Note especially
the corporate name changes.

When I am tracking stock merge and split information, I try to record
enough information about the transaction that I can find it several
years later, but I use a word processing document for that. If I felt
I could get detailed enough descriptions into GnuCash buy/sell
transactions, it might work fine, but I might feel compelled to enter
the historic information, too, so it's all in one place.

My ultimate goal is to describe the changes well enough that I and/or
a tax accountant can research it one, two or more years later, when I
need to report it to the tax authorities -- the intermediate data is
essentially meaningless until then.

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