Tracking a Corporate Spin-off Into Multiple Subsidiaries
Occasionally, a parent company will spin-off more than one subsidiary. In the investment register, the Easy Action for Corporate Securities Spin-off is designed for a single spin-off. In the case of multiple subsidiaries, you cannot use the Easy Action function and must manually enter the transactions.
To manually enter a corporate spin-off:
- Enter a Return of Capital (RtrnCap) allocated to the parent company in an amount equal to the combined cost basis of all the subsidiaries. This decreases the cost basis of the parent company without decreasing the number of shares.
- Since this increases the cash balance in the register, you need to enter a Buy (Buy) for each of the subsidiaries. For each subsidiary, the number of shares in the Buy will equal the number awarded; the total amount will equal the cost basis for the respective subsidiary. Let the Quicken program calculate the price per share, since this will probably not be equal to the price on the day of the spin-off.
- In order to get the correct Market Value for a subsidiary on the day of the spin-off, you will need to edit the price in the price history window.
Here is an example of a parent company with multiple spin-off companies, and how to track them in multiple subsidiaries:
You hold 1,000 shares of Company A at $20.00 per share (Cost Basis is $20,000). Company A spins-off new companies called Company B, Company C, and Company D. You receive (based on your divestiture statement) 250 shares of Company B with a Cost Basis of $2,000. You receive 500 shares of Company C with a Cost Basis of $4,000. You receive 750 shares of Company D with a Cost Basis of $6,000. You must reduce the Cost Basis of Company A by $12,000 (2,000 + 4,000 + 6,000) without reducing the number of shares.
- Enter a RtrnCap allocated to Company A (parent) for the value of Companies B, C, and D ($12,000). This will decrease the Cost Basis of Company A without decreasing the number of shares.
- Since this increased your cash balance, enter Buy Transactions for each of the subsidiaries: 250 shares of Company B with a Cost Basis of $2,000, 500 shares of Company C with a Cost Basis of $4,000, 750 shares of Company D with a Cost Basis of $6,000. As you enter these transactions, let Quicken calculate the price per share. After the Buys are recorded, the cash balance should be back to the amount prior to step 1.
- Edit the price history for each of the subsidiaries and enter the closing price for the day of the spin-off. This will update the market value for each of the subsidiaries.
Note: The number of shares of the parent company stays the same, and the cost basis decreases by the value of the new shares received in the subsidiary companies.