Splitting fractional shares

[clay c]

A stock recently split that had fractional shares from dividend reinvestments. FM handles the 2 for 1 split by doubling the fractional shares, but Schwab only splits the whole shares. How do I fix this without having to artificially putting the split before the fractional shares were received?

[Mark]

Hi clay c,

Did you receive cash for the selling of some partial shares? If so, record the split with the correct ratio, and then a sell for the partial shares. Generally if there is a 2 for 1 split, you should end up with exactly double the number of shares, unless some of partial shares were sold. If for some reason you only got some of the shares, and nothing was sold, you can record the split with the actual ratio used in your case. For example, record the split with <new shares> for <old shares> as the ratio.

[clay c]

Yes there was cash in lieu. However, even though the split was on 3/31/14, fractional shares from div reinvestments before the split are also doubled?

[clay c]

Ok thanks I fixed it by selling 1/2 of the fractional shares (that were added from the split). Why doesn't the program handle this transaction without having to show a sell for the fractional shares? Probably every brokerage handles splits this way (cash in lieu instead of splitting fractional shares). Thanks

[Mark]

Glad you figured it out. Fund Manager records the transactions as reported by your broker. It is quite common to sell fractional shares after a split. The proper way to record this is with both a split for the correct ratio, plus a sell for the fractional shares. FM won't automatically record things this way, it just imports the transactions as reported by the broker.

[Perry]

Can you please clarify?

For a 2 for 1 split, my brokerage statement does not state that the partial shares were doubled with half of being sold for the “Cash in Lieu” amount.

It simply shows a split on the whole shares and a “Cash in Lieu” credited dollar amount for the partial shares that did not get split.

When using my statement to enter historical transactions I entered the 2 for 1 split and also the “Cash in Lieu” transaction for the partial shares that were not split. FM does split the partial shares which is what I believe you are saying it should do.

Does this mean that if I have FM download the transactions (from now on going forward-not having to enter them manually) that it will actually show that the fractional shares were split 2 for 1 and then half of them were sold? Or will I always have to correct this issue by making manual entries for a sale of half of the partial shares?

Thanks
P

[Mark]

Hi Perry,

Maybe an example will help. If you had 10.2 shares and there was a 2 for 1 split, record this as a 2 for 1 split in Fund Manager. The result will be you have 20.4 shares in Fund Manager. If your broker says you now have 20 shares, plus some cash for the partial shares, record a sell of 0.4 shares (so you end up with 20 shares), for the amount of cash you received.

It doesn't matter whether you record this manually or when you retrieve from your broker. You only have to do it once, and going forward, just record/retrieve any new transactions as they happen.

[Perry]

Mark,

My question concerns the difference between how Fund Manager handles historical transactions entered by me versus those that will be retrieved automatically in the future.

Using your example, I have found this to be my situation. I have 10.2 shares.
In Fund Manager, entering the 2 for 1 split transaction gives me 20.4.

My actual brokerage account statement would say that (once the split occurred) my account now has 20.2 shares plus (for example) $5 for the 0.2 shares that (as far as my statement shows) were never created.

I understand that this can be dealt with in Fund Manager by creating a sale transaction to sell 0.2 shares for $5 and I would also not create the $5 Cash in Lieu transaction.

My question is: For any future splits of stocks that have fractional shares, will I always create a sale transaction for the fractional shares (0.2 shares) and delete the ($5) Cash-in-Lieu transaction or will retrieving them automatically take care of both of these?

I'm quite new to this.
Thanks again,
Perry

[Mark]

Hi Perry,

The sell transaction is the same thing as the "cash in lieu" transaction. There is no such thing as a "cash in lieu" transaction, it is simply a sell. Corporate actions like this can come down from your broker in a variety of ways, and if you get any future splits you may have to manually correct how it comes down from your broker. For instance, a lot of times it will come down as a transfer in of the new shares, instead of a split transaction. The best way to record this situation is with a split, and optionally a sell transaction for any partial shares that were sold.

[Perry]

Thanks for the info.
Perry