Recording Spinoff transaction

[oscarhobson]

I'm unsure how to record a transaction. Company A spins off company B; I think it was treated as return of capital. I receive 10 shares in company B, and $36.86 in cash in lieu of a fractional share. Nothing changes with my shares in company A. This should be some sort of distribution? I want to make sure that the $36.86 is recognized as a short term capital gain. Any help would be appreciated.

Thanks,

Oscar Hobson

[Mark]

Hi Oscar,

You'd want to use the Spin-Off Wizard to help you record this. Right mouse click on the parent investment, and choose "Investment Data / Spin-Off..." and enter in all the details. Record the shares for the full amount, including any fractional shares. After using the spin-off wizard you can go record a sell transaction for the fractional share.

[oscarhobson]

Mark,

I'm getting the following error when using the spin-off wizard: Tax free spinoff not supported when any lot has a negative tax basis. The data I'm putting in are
Parent company - Arcelor Mittal
Spinoff Aperam APEMY
Date: 2/01/11
Number of shares 10.925
Cost basis 356.78 (what the brokerage showed)
Market value 442.46 (based on an open price of $40.50 on first day of trading).

Should I be entering in something different for the market value, or is there something else I'm doing wrong?

Thanks,

Oscar Hobson

[Mark]

Hi Oscar,

If you look at the top of the spin-off wizard in the section that describes the pre-spin off parent cost basis, are those numbers positive?

[oscarhobson]

Yes, it shows $6571.79, which is different than the brokerage is showing. Is there a way to show Fund Manager's cost basis per lot? I think it may have something to do with a specific (dividend) lot. And/or the way I was recording dividends, since I wasn't sure how to account for foreign tax paid. For example, the brokerage would show a dividend received of $40.79, but would take out $6.12 as foreign tax, resulting in a cost basis of $34.67. Half of the dividends I would account for the foreign tax paid in the commission field, and half of them I didn't. So I think I need to go through each dividend transaction and straighten them out before I spend any more of your time. Attached is a screen shot of the open lots report, and the spinoff wizard.

Thanks,

Oscar Hobson

[Mark]

Hi Oscar,

While you're viewing the Open Lots report, go to "Options / Report Preferences... / Open Lots" and turn on "Tax Basis". Make sure you're running the open lots report with the same accounting method as you're using in the spin-off wizard. If that doesn't help identify the problem, you can email us that investment file, and we can take a look.