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Posted by R. C. White on January 18, 2007, 10:04 am
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Hi, Katie.
You must have missed the thread here earlier this month. On 1/2/07, Jason
Molinari asked about this transaction his post with the Subject: Re: Corp.
acquisition recording transactions question.
I posted a long reply. The key paragraph from my response included this key
paragraph:
>The first problem is worked out for you on BellSouth's Investor Relations
>page. For the worksheet, see:
http://www.att.com/gen/investor-relations?pid=7983#6
Please read that AT&T web page. Then read my reply to Jason. If you have
further questions, please post back.
Yes, although unusual, it is certainly possible to have fractional shares of
many stocks, especially if you acquired them in a DRIP or employee purchase
plan. Usually, in an acquisition or spin-off, fractional shares are sold as
a part of the transaction and the shareholder receives a check for the value
of the fractional share. This "sale" is recorded as a sale of the
fractional share immediately after the acquisition or spin-off is recorded,
including calculation of the new tax basis of that fractional share. The
BellSouth acquisition did provide for purchase of fractional shares, but see
the paragraph (on page http://www.att.com/gen/investor-relations?pid=8521)
entitled, "Participants in the BellSouth Direct Investment Plan".
As you probably know, the history of AT&T's stock has been a tangled one.
Since the 1984 breakup, the former Ma Bell and all the Baby Bells have been
involved in many mergers, acquisitions, spin-offs, etc. - and name changes.
By 2005, the former Southwestern Bell subsidiary had gobbled up nearly all
the remaining former pieces and on 11/18/05 "became its own grandpa" by
acquiring what was left of the original AT&T Corp. Immediately after that,
it changed its own name from SBC to AT&T Inc. Note the
subtle-but-significant name change from "Corp." to "Inc.". It was this
"new" AT&T Inc., which acquired your BellSouth on 12/29/06.
See the other long thread here, started by John Blaustein on 12/05/05,
Subject: How to enter SBC acquiring AT&T? We discussed that unusual
transaction pretty thoroughly, but it should not involve you, except for its
historical interest.
To answer your specific questions:
> tell me how to enter this transaction in Quicken 2006
Use the Corporate Acquisition (stock for stock) transaction. Note that it
doesn't even ask how many shares (or fractions) of BellSouth you owned (it
already knows that.) or what you paid for them. It asks for the number of
new shares (1.325) per old share. And it asks for the "Price per share..."
of AT&T - but that number is irrelevant, so it doesn't matter what you put
here. As I said in the earlier thread, "Quicken should automatically adjust
each lot of your BellSouth stock to reflect the new number of shares and the
new basis per share, and add it to your AT&T holdings. Each lot should
still show its original acquisition date. You then record the sale of the
fractional share, and you're done for now." (And read Stephen Ciffone's
post here earlier today.)
> after making
> the change will the cost basis be maintained so that it will be
> available for future tax purposes?
Yes, but...
The "fun" will come when you start to sell your new shares, because you will
need to determine WHICH shares you are selling (unless you sell them all at
once) and the basis and holding period of those particular shares. (Hint:
Let Quicken select them for you. You choose "Specify Lots..." from the Sell
transaction screen, then start with the oldest shares and keep going until
Quicken has selected enough shares to match what you are selling. This lets
Q resolve rounding problems so that it doesn't some day think you have
0.00001 share left after you know you've sold them all.)
I'm happy to say that I haven't had to work out such a basis calculation for
DRIP shares in nearly 20 years, and that was pre-Quicken. As I recall, it
wasn't hard. But it was TEDIOUS! I hope Quicken makes it easier for you.
RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc@grandecom.net
Microsoft Windows MVP
(Currently running Vista Ultimate x64)
> On December 29, 2006 I was holding 809.6203 shares of BellSouth Stock.
> On that date the exchange to AT&T took place. Could someone please
> tell me how to enter this transaction in Quicken 2006 and after making
> the change will the cost basis be maintained so that it will be
> available for future tax purposes?
>
> BellSouth Share Exchange
> BellSouth shares 809.6203
> Exchange Rate 1.325
> AT&T Stock Credited 1,072.746898
>
> Thank you for any help.
>
> Katie
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