ESPP Question

I have Quicken 2005 Premier and have been unable to determine how to handle a change to my Employee Stock Purchase Program account. The new, current plan's terms are:

  1. Offering periods run for 6 months, starting on 1/1 and 7/1
  2. Purchase price is 95% of the average market price on the date of purchase
  3. Purchases accrue semi-monthly and are calculated to 4 decimal place precision.

The problem I encounter is when I try to enter a tranaction (ESPP Buy) and the price on date of offering is lower than the price on date of purchase, Quicken wants the purchase price to be the LOWER of the two discounted amounts, i.e. 95% or the average market price on date of offering.

I would like to keep these as ESPP shares so the proper tax accounting occurs when I sell.

Is there a methodology which will accomplish this? I tried Intuit support but they had no answer.

Reply to
MetaMagic
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OK, I'm unclear on your situation.

1) In the period 1/1 to 6/30, HOW many purchases are there? I can't tell from your description if theres 1, at the end of the period, or 12, one each half-month.

2) When money for ESPP is withheld from your paycheck (right?), how do you record that? It should probably be recorded into an investment account of some type ... one that's dedicated to your ESPP stock. And then the purchases would be recorded in the investment account.

BTW, there are so many limitations associated with the "single mutual fund" type investment account, that you probably should NOT have the investment account set up as SMF.

db

Reply to
danbrown

Dan,

  1. Purchase are every 15 days, i/e/ 2x per month ont he 15th and last day of month. So, from 1/1 to 6/30, there will be 12 purchases.
  2. I deposit it >OK, I'm unclear on your situation.
Reply to
MetaMagic

I want to make sure that I understand what you're doing and what you're seeing in Q.

I assume that the cash account is LINKED to an investment account. Correct?

So, you go into the investment account, click the "Enter transactions" button, and use the "Enter transaction" drop down to select "Bought ESPP Shares", you adjust the date (if necessary) and click "Launch Wizard".

The Wizard asks to to select/create the particular stock, you click next, indicate that you're doing a Buyx, and click Next and the actual data entry screen comes up. (So far, so good?).

At this point, from what you've said about your plan, the offering date (for example, 1/1 for the first period) and the offering price (on 1/1) are irrelevant. What matters in YOUR plan is the ending date/price ... so I'd be inclined to TRY (backup your Q data before playing around with this) entering the SAME date/price for BOTH offering and ending prices ... and see what happens.

In effect, you'd be creating 12 (1 each payday) offering periods of 1 day each ... which sure LOOKS (from an investment perspective) like what's happening.

db

Reply to
danbrown

Dan,

Sorry, been up to my butt in aligators lately. I will work up a set of sample transactions so you can see the problem exactly. Give me a day or two. Thx.

MM

Reply to
MetaMagic

OK Dan, here is a blow-by-blow...

In the Investing Center, I have an account set up for stocks purchased under the Employee Stock Purchase Plan (Account Description = ESPP Account). This plan at my company calls for a discount of 5% from the fair market value on the date of purchase.

On July 15, 2005, I purchased 7.722 shares at a purchase price of $77.71 which represents a 5% discount from the FMV on that date of $81.80. The date of offering for this purchase was July 1, 2005 and the FMV on that date was $74.82.

To enter this transaction, I click on the Enter Transactions tab and select Buy ESPP Shares. I enter the transaction date as 7/15/2005 and click on Launch Wizard.

On the next screen, I select A Stock I Already Own, followed on the next screen by Yes, Subtract from my cask balance in this account (Buy).

On the final screen, I enter the following:

Number of Shares: 7.722 Price Per Share: 77.71 Transaction Date: 7/15/2005 Commission/Fee: 0 Offering Date: 7/1/2005 End Date: 7/15/2005 Price on Offering Date: 74.82 Price on End Date: 81.80

When I click on Enter, I receive the following message:

The ESPP price per share must be the Fair Market Value (FMV) at the beginning (or end) of the ESPP grant period (which ever is less) reduced by the given discount rate. Please correct the price, beginning/end FMV and/or the discount rate accordingly. Emphasis mine

As you can see, it is looking for the lower of the two discounted prices whereas my ESPP offers the discount only on the date of purchase, not the date of offering. If I enter these as non-ESPP shares at the true purchase price, I can get them into Quicken but then the transfer to TurboTax upon sale is incorrect since it does not take into account the ESPP values. Is there some way to get these into Quicken with the rules without having the lower of the 2 prices be required?

MM

Reply to
MetaMagic

I thought I understood (and your last message seems to confirm) that the OPENING FMV of $74.82 it, in your plan, totally irrelevant ... that the only thing that matters is the 7/15 FMV.

So input the 7/15 price for BOTH dates. You can quite possibly enter the 7/15 DATE for both dates since it's not apparent why the 7/1 date has any relevance either.

db

Reply to
danbrown

Dan,

The relevance for the 7/1 date is strictly for income tax purposes. When you sell an ESPP share, your 1040 requrires the "Data of Offering" information to calculate the amount of ordinary income vs the capital gain/loss on the shares. The difference between the average market price on the date of offering (7/1 in this case) and the purchase price on the date of offering (95% of the 7/1 price) is considered to be ordinary income. The difference between the sale price less the purchase price PLUS the ordinary income is considered to be capital gains/losses, If the 7/1 data is omitted or misrepresented, the tax calculations are lost.

MM

Reply to
MetaMagic

So you've got an impossible situation.

The FMV on the offering date is irrelevant (indeed, misleading) for calculating the price you pay, yet it's necessary for tax purposes (since I'm self-employed, it's been too long since I've had ESPP-anything to remember the tax details, sorry).

I just flipped over to the quickenforums.com and did some research on ESPP transactions. It appears that there's more than a few issues (plan variations, such as yours) that Intuit didn't count on.

I'm starting to think that your best bet might be to ignore the wizard, enter the transactions as a regular security buy and track the tax issues outside of Q.

db

Reply to
danbrown

Dan,

That's where I figured I'd end up. I did yru running this question throug Intuit but they came up dry too. I had hoped that the gurus here might have a way. Thanks for sticking with me and trying!!!!

MM

Reply to
MetaMagic

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