Spinoffs

[HCPierce]

Mark: I'm having trouble each time a stock company makes a spinoff. One day, for instance, 100 shares of a stock "A" are worth $10,000. The next day, the 100 shares of this stock "A" are only worth $8000. However, this day I'm issued 100 shares of stock "xyz" worth $2000.

The only way I've found to make my way through this is to show a sale of stock "A" for $10,000 on day one. On day two, I show a purchase of 100 shares of stock "A" at $8,000. Also, on day two, I show a purchase of 100 shares of stock "xyz" at $2,000. Since the funds transfers of the sale proceeds and purchase costs go into and out of the common cash acount, this works. Also, this re-evaluates the cost basis of Stock "A".

However!!! I'm sure I probably am not doing things as I should nor how you envision a transaction of this nature should be done. The main problem for me is how to get $2000 out of Stock "A" account and transfer it to Stock "xyz" without affecting the number of shares in Stock "A" account holdings.

Best regards, Chuck Pierce, Dana Point, CA

[Mark]

Hi Chuck,

Have you seen the "Spin-off" dialog? Right mouse click on an investment, and choose "Investment Data / Spin-off". This dialog records a spin-off as a combination of 2 transactions:

1) A "Return of Capital" distribution in the parent. This lowers your cost basis in the parent, while keeping the same number of shares.

2) A new purchase in the child, for the same amount as the distribution from the parent.