How to handle Spin offs?

[tedzo]

Hello,
I am trying to figure out how to handle spinoffs using the generic import functionality. What values to use for TRAN, SYMB...

Thanks.

[Mark]

Hi tedzo,

You can record a spin-off with a combination of 2 or 3 transactions. You would need a purchase in the spun-off child for the amount of the transferred cost basis. You would also record a "Return of Capital" distribution in the parent for the amount of the transferred cost basis. You could also record an additional "Other" distribution in the parent for the difference between the transferred cost basis and the market value. The sum of both distributions should total the market value decrease in the parent and the market value of the child.

[tedzo]

Mark,
Thanks as usual for the response.
I would like to clarify with an example-
Say, company A was purchased with a cost basis of $10. It spinsoff companyB and the transferred basis is $2. At the time of the spinoff, the market value of companyA was $15. After the spinoff, its market value becomes $12 (I think). So, what I understand is-
1. Record a purchase of companyB with cost basis $2.
2. Record a return of capital distribution for companyA of $2.
3. Record a "Other" distribution of $1 for companyA.

Does that sound right?

Thanks.

[tedzo]

Mark,
What are the TRAN values for Return of Capital and Other distribution? The help in the software doesn't mention these 2 types. They do appear in the "Data Register" dialog however.

Thanks.

[Mark]

Mark,
Thanks as usual for the response.
I would like to clarify with an example-
Say, company A was purchased with a cost basis of $10. It spinsoff companyB and the transferred basis is $2. At the time of the spinoff, the market value of companyA was $15. After the spinoff, its market value becomes $12 (I think). So, what I understand is-
1. Record a purchase of companyB with cost basis $2.
2. Record a return of capital distribution for companyA of $2.
3. Record a "Other" distribution of $1 for companyA.

Does that sound right?

Thanks.

Hi tedzo,

Yes, this is right. Also, the market value of company B should end up being $3 too (even though you purchased at $2), the same as the market value drop of company A due solely to the spinoff.

[Mark]

Mark,
What are the TRAN values for Return of Capital and Other distribution? The help in the software doesn't mention these 2 types. They do appear in the "Data Register" dialog however.

Thanks.

Hi tedzo,

They are mentioned in the online help, if you look toward the bottom, in the table of all the possible TRAN codes:

http://www.fundmanagersoftware.com/help ... neric.html

See "DIST_R" and "REINV_R".

[tedzo]

Hmm, the help window in my version of FM doesn't show these 2 TRAN values. ARe these new features in version 8? I am running 7.x (maybe 7.. If they are new for 8.0, I suppose I can't use them or can I?

Thanks.

[Mark]

Hi tedzo,

Yes, I do believe these were added in version 8.x. They will not work in 7.x.