Conversion of Shares

Corporate Acquisition.

I don't see an option for that. Any other thoughts? Thanks.

First of all, Admiral shares are not priced the same as Investor shares so you have a different anount of shares after the conversion. They also have their own symbol. I used a stock split and then changed the symbol on the security list. Do it right and it doesn't change all the old prices.

how do you figure out the split ratio? doesn't it need to be in reasonably whole numbers?

alan

First of all mutual funds are usually sold out to three decimal places. Not just whole numbers. If you're talking about splits being whole numbers, no, they can be anything.

Quicken asks you how many shares you gave up and how many you received and then calculates the right ratio, even if it's a fraction. It then goes back and converts all the transactions to the new number of shares. That way you keep the history with the right dates and purchase dollars. The shares are now shown at six decimal places, but so what. You can go back and adjust each transaction or just wait until you sell the final converted amout.

I got it now - thanks for the explanation. It will be a good way to do this change of share class

alan

Charlie

I followed your instructions and had reasonable success but some further questions.

I did the share split and ended up with very close to the correct shares with new class. I saw that quicken automatically changes the historical share prices and share numbers to reflect the new class. I then changed the security symbol name to the admiral class, and i was asked whether to delete the investor class historical prices, merge the two or do the default, which I selected. So only the admiral class share price was retained for the past few days and I downloaded the historical prices to fill in the missing data. I wonder if this is the correct approach. I see that original purchase dates and cost basis was retained which is the goal. And no sales are recorded to give phantom capital gains, also good.

But admiral share classes only go back a few years and I had to develop additional historical share prices by taking the investor class share prices and adjusting them according to the 'split' ratio. (yahoo has the prices net of dividend adjustments). This was workable since i only had a few years to go back and do this for. I have other funds where this would be tedious - even on a quarterly basis. I might be able to import a file to do this - but is there any other alternative. Or perhaps I did something incorrectly.

Some other thoughts - I tried coporate acquisition as an approach - but the transaction is considered a capital gain and dates of original purchase are lost.

I wonder about just using 'remove shares' and 'add shares' and whether these will work and not trigger any gains. Seems this could be very easy - but I think the original dates of transactions would be lost.

Appreciate any further thoughts from you or others. This would seem to be a good area for Quicken 06 to tackle

alan

Corporate Acquisition does *not* create a taxable gain. Under the covers it works with ShrsOut and ShrsIn.

may be you can explain more. I am speaking of running a capital gains report in Quicken and it appears to show those share conversions as sales. Or perhaps I am missing something. Do I retain original dates of purchase of the acquired shares? This is important

thanks

alan

How much was the capital gain reported in the Capital Gains report?

Try opening (Editing) any of the generated transactions from the corporate acquisition: note the "Date Acquired".

Hey Mike,

Replied to your email, but your isp says "not_our_customer". Did you leave in a huff? :)

LOL. Even my ISP disowns me. :( I'll check into it.

John

I had deleted the conversion of shares done by corporate acquisition so I do not know the details. Is corporate acquisition supposed to be the most correct way to change the class of mutual fund shares? Or is a stock split better? or is there no ideal way - I saw some of the complaints on Quicken forums.

alan

I'm not qualified to answer the question of which method is "ideal" or even "better".

My point was that I believe that Corporate Acquisition handles the situation correctly.

While Shares Removed transactions generated by a Corporate Acquisition do appear in the Capital Gains report, they appear with a capital gains of zero. I am not sure why Quicken puts those transactions in the report, or why it puts the sale of money market funds in the report (which also have capital gains of zero) - perhaps it is thought to make it easier to guarantee that no legitimate transaction ever is missing from the report. In any event, there are no capital gains from the corporate acquisition.

And Shares Added transactions (one for each original purchase of the "acquired" security) have a "Date Acquired" field, which a Corporate Acquisition correctly enters for you, so your original purchase dates are not lost.

I'm glad I started tracking this thread because I'm going to have the same problem with Vanguard.

The desired effects are: (1) don't change past history as far as price info, distributions, etc; (2) don't generate a taxable event (sale); and (3), maintain the original tax basis as the tax basis for the Admiral shares so that a future sale will use the original basis.

It looks to me like "Corporate Acquisition" is the right thing, but I haven't tried it out yet. The new ticker symbol protects the history info and carrying through the value of the shares to the new name (Admiral) makes the value correct.

But, what is Vanguard going to tell the IRS? Will they send in a 1099 for the original name/symbol as if there were a sale?

Vanguard states clearly at their web site that a "conversion" to Admiral shares is non-taxable; so I can not imagine why they would send the IRS any documents that indicated you had a tax liability for the conversion.. A conversion can only occur if your new shares are in the same fund as the old shares - though Vanguard gives different fund numbers and symbols to the Admiral share funds.

If you owned a fund that did not offer Admiral shares and wanted to change that investment to a fund that did offer Admiral shares, Vanguard again clearly states that you would have to "exchange" shares between two different funds, and that would be a taxable event.

The difference in terminology is important, I think. Conversion is non-taxable; exchange is taxable.

John

thanks for your comments. I will try the acquision approach for my next conversion, which is Vanguard. So William's comments are timely. I was able to get it all to work out with split but it was a bit tedious and had to create share prices for admiral class even prior to their existence - to maintain a price history - even if it was theoretical. but I was able to manage since there were not that many purchases o v er the 5 year period.

alan