Just downloaded transactions and now have the spinoff from Sprint called - Embarq -
How should I account for the cost basis of a spinoff ?
Since it just appears as Shares Added with a $0 cost basis, do I just leave that, or should I modify that $0 cost basis according to some ratio ?
What about the issuing Sprint stock ?
Hi, Phil.
I'm not familiar with the Sprint spinoff, but the rules for spinoffs generally are well-known - and discussed here often.
The total basis (normally the cost) of your Sprint investment hasn't changed, but now it is split between your old Sprint share and your new Embarq shares. The tax code says to allocate the original basis among the old and new shares based on the fair market values of the shares immediately after the spinoff.
You didn't say which Quicken version you are using. Older Quickens had "Easy Actions"; the new versions use a drop-down list when we click Enter Transactions. Use the one labeled "Corporate Securities Spin-Off". The only tricky part is Quicken's terminology. The form asks for "Cost" of the old and new shares. It should ask for the FMV immediately after the spinoff. Once Quicken knows these values, it can properly allocate the original basis among the old and new shares.
As a test, after entering the spinoff transaction, make sure that your total basis of the old and new shares equals your original basis in Sprint. This doesn't prove that it's right - because you could get that answer by allocating zero to Embarq and leaving Sprint unchanged - but if the total is not right, then something is wrong.
I don't download transactions. The few times I've tried, I've spent more time tweaking the results to suit me than I've saved by downloading. So I can't speak to that aspect of your situation.
RC
Hi, again, Phil.
I should have added that each Sprint shareholder should not have to determine the FMVs for himself. Within a few days after the spinoff, Sprint should publish their version of these values. They might even publish a worked-out worksheet showing how to allocate your basis. Go to the Sprint website and look for a page called Investor Relations, or something similar.
RC
thanks - yeah, I had found some web examples of how in general to handle spin-off transactions. I even have to update my brokerage account the same way manually. Taking the total original cost basis and re-distributing it between the
2 entities. BTW - for this new Embarq -BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.