Merger of same mutual fund to a different class

Posted by Andrew on August 24, 2009, 10:50 pm

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This has been discussed a few times, but I can't seem to get this to work.

Schwab recently collapsed their mutual funds getting rid of some classes of
the SAME fund.

I held fund "SCHAAA" which is now fund "SCHBBB" (same mutual fund name,
different symbol - see
http://www.schwab.com/public/schwab/research_strategies/mutual_funds/funds/schwab_funds_mutual_fund_consolidations.html).

Their FAQs indicate "These symbol changes are part of share class collapses
that are considered to be tax-free for U.S. Federal income tax purposes."
So it is NOT a sell and repurchase, since I lose the cost basis and it's not
a taxable event.

Schwab's website sez I sold (example to get the point across) 1000.00 shares
of SCHAAA and bought 999.990 shares of SCHBBB, a slightly less number.

I tried a stock split using the number of old shares (ex: 1000.000) and the
# of new shares (999.990), but Quicken changed the number of new shares to a
slightly different number (eg: 999.998323) which I assume is some sort of
round off error. So my number of shares don't quite match Schwab's
website - darn close, but not correct. And I know this will bite me at the
end.

I suppose since I don't use Q to calculate cost basis, I could indeed simply
'sell' and 'buy', but then my price history won't be right.

Any ideas??
--
-------------------------------------------------------------
Regards -

- Andrew

Posted by John Pollard on August 25, 2009, 9:16 am

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Andrew wrote:

> This has been discussed a few times, but I can't seem to get this to

> work.

> Schwab recently collapsed their mutual funds getting rid of some

> classes of the SAME fund.

> I held fund "SCHAAA" which is now fund "SCHBBB" (same mutual fund

> name, different symbol - see

http://www.schwab.com/public/schwab/research_strategies/mutual_funds/funds/schwab_funds_mutual_fund_consolidations.html).

> Their FAQs indicate "These symbol changes are part of share class

> collapses that are considered to be tax-free for U.S. Federal income

> tax purposes." So it is NOT a sell and repurchase, since I lose the

> cost basis and it's not a taxable event.

> Schwab's website sez I sold (example to get the point across) 1000.00

> shares of SCHAAA and bought 999.990 shares of SCHBBB, a slightly less

> number.

> I tried a stock split using the number of old shares (ex: 1000.000)

> and the # of new shares (999.990), but Quicken changed the number of

> new shares to a slightly different number (eg: 999.998323) which I

> assume is some sort of round off error. So my number of shares don't

> quite match Schwab's website - darn close, but not correct. And I know

> this will bite me

> at the end.

> I suppose since I don't use Q to calculate cost basis, I could indeed

> simply 'sell' and 'buy', but then my price history won't be right.

> Any ideas??

I think the Corporate Acquisition transaction is the most frequently used
"solution" in this situation. It is probably not an ideal solution, but I
think it usually works.

But since it too, like the Stock Split transaction, requires giving
Quicken a ratio to use to compute the number of new shares you'll have; it
too may not get the number of new shares exactly correct (though I think
you should be free to experiment with the ratio to see if you can find one
that will create the correct number of new shares - 1000.000/999.991, for
example). If no ratio produces the exact number of new shares correctly,
I don't see why you can't just enter an "adjustment" (an Add Shares, or
Remove Shares) to get the share balance correct.

--

John Pollard

Posted by Andrew on August 25, 2009, 6:14 pm

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John Pollard wrote:

> Andrew wrote:

>> This has been discussed a few times, but I can't seem to get this to

>> work.

>> Schwab recently collapsed their mutual funds getting rid of some

>> classes of the SAME fund.

>> I held fund "SCHAAA" which is now fund "SCHBBB" (same mutual fund

>> name, different symbol - see

http://www.schwab.com/public/schwab/research_strategies/mutual_funds/funds/schwab_funds_mutual_fund_consolidations.html).

>> Their FAQs indicate "These symbol changes are part of share class

>> collapses that are considered to be tax-free for U.S. Federal income

>> tax purposes." So it is NOT a sell and repurchase, since I lose the

>> cost basis and it's not a taxable event.

>> Schwab's website sez I sold (example to get the point across) 1000.00

>> shares of SCHAAA and bought 999.990 shares of SCHBBB, a slightly less

>> number.

>> I tried a stock split using the number of old shares (ex: 1000.000)

>> and the # of new shares (999.990), but Quicken changed the number of

>> new shares to a slightly different number (eg: 999.998323) which I

>> assume is some sort of round off error. So my number of shares don't

>> quite match Schwab's website - darn close, but not correct. And I

>> know this will bite me

>> at the end.

>> I suppose since I don't use Q to calculate cost basis, I could indeed

>> simply 'sell' and 'buy', but then my price history won't be right.

>> Any ideas??

> I think the Corporate Acquisition transaction is the most frequently

> used "solution" in this situation. It is probably not an ideal

> solution, but I think it usually works.

> But since it too, like the Stock Split transaction, requires giving

> Quicken a ratio to use to compute the number of new shares you'll

> have; it too may not get the number of new shares exactly correct

> (though I think you should be free to experiment with the ratio to

> see if you can find one that will create the correct number of new

> shares - 1000.000/999.991, for example). If no ratio produces the

> exact number of new shares correctly, I don't see why you can't just

> enter an "adjustment" (an Add Shares, or Remove Shares) to get the

> share balance correct.

Thanks John - I'll give that a try - I was thinking about the adjustment as
well. Appreciate it. Enjoy the rest of the little summer we have left.

--
-------------------------------------------------------------
Regards -

- Andrew

Posted by TomYoung on August 26, 2009, 3:57 pm

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> This has been discussed a few times, but I can't seem to get this to work=

> Schwab recently collapsed their mutual funds getting rid of some classes =

> the SAME fund.

> I held fund "SCHAAA" which is now fund "SCHBBB" (same mutual fund name,

> different symbol - seehttp://www.schwab.com/public/schwab/research_strate=

gies/mutual_funds/...).

> Their FAQs indicate "These symbol changes are part of share class collaps=

> that are considered to be tax-free for U.S. Federal income tax purposes."

> So it is NOT a sell and repurchase, since I lose the cost basis and it's =

not

> a taxable event.

> Schwab's website sez I sold (example to get the point across) 1000.00 sha=

res

> of SCHAAA and bought 999.990 shares of SCHBBB, a slightly less number.

> I tried a stock split using the number of old shares (ex: 1000.000) and =

=A0the

> # of new shares (999.990), but Quicken changed the number of new shares t=

o a

> slightly different number (eg: 999.998323) which I assume is some sort of

> round off error. =A0So my number of shares don't quite match Schwab's

> website - darn close, but not correct. =A0And I know this will bite me at=

the

> end.

> I suppose since I don't use Q to calculate cost basis, I could indeed sim=

ply

> 'sell' and 'buy', but then my price history won't be right.

> Any ideas??

> --

> -------------------------------------------------------------

> Regards -

> - Andrew

It seems to me that if you don't use Q to calculate cost basis but
only to have a share price history then the simplest thing is to just
do a remove shares transactions and an add shares transaction. I
don't think these sort of transactions affect the price history.

Tom Young

Posted by Andrew on August 27, 2009, 9:09 am

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TomYoung wrote:

> It seems to me that if you don't use Q to calculate cost basis but

> only to have a share price history then the simplest thing is to just

> do a remove shares transactions and an add shares transaction. I

> don't think these sort of transactions affect the price history.

> Tom Young

Good point - along with some prominent comments indicating it was a
repurchase of essentially the same security to keep my records straight, but
indeed work. Thanks Tom.
--
-------------------------------------------------------------
Regards -

- Andrew