Questions about updating prices or transactions in Fund Manager
10 posts • Page 1 of 1
I'm the new recipient of a handful of Fairpoint shares, courtesy of Verizon's latest spin-off, and I confess I have no idea how to enter the data for VZ and FRP. I've had many spin-offs before, and as I'm a customer dating to the dark ages I'm still doing what I learned back in version 4 (I have 8.7 currently). I see no guidance at all on either the Verizon or Fairpoint sites, nor in the mail I received, as to the cost basis for the Fairpoint stock. I am not able to determine from any data at hand, what it might be.
You will need to somehow determine the cost basis of these shares. It may be reported as a percentage of your cost basis in VZ before the spin-off. Your broker should be able to provide this percentage or rule for determining the FRP basis, or you can search the web. Once you do obtain the cost basis, use the "Spin-Off" dialog to record this. The spin-off dialog will display your current VZ basis, for help in determining the FRP basis, but you will need to know what percentage or rule to use.
Still no info at all from the broker or from the handling agent.
I did get some cash-in-lieu today on the partial share, so at least I have a pseudo cost basis, as in "sell price." I can extrapolate that out... is theere any better way?
Also, is it now typical to figure the cost basis according to what I originally paid for the VZ shares, or to just to return of capital to VZ based on what was paid earlier this week for FRP? That is, if I got 10 shares of FRP at $7/share earlier this week, and my VZ was worth exactly double what I originally paid for it, do I do return of capital (cost basis) of $70, or of $35? In the past, I always did it the hard way (i.e., $35 -- figuring the cost basis went back to the original purchase, and also in the pre-spin-off dialogue days that was the only way I knew to do the redemption as a tax-neutral event), but it would seem to be a lot easier to do it as $70.
I'm not sure of how else you can get the cost basis instructions, besides from the parent doing the spin-off, or your broker...
When you use the spin-off dialog, Fund Manager records a return of capital distribution in the parent, equal to the cost basis of your new child investment. So, if your FPR basis ended up being $70, you would have a $70 Return of Capital in VZ. This type of distribution will decrease your cost basis in the parent by the amount of the distribution. Basically, you are transferring cost basis from the parent to the new child. The child cost basis is equal to the amount the parent's cost basis reduces by.
When I receive small spinoffs (I received 4 shares of FRP), here is what I do: I assume a basis of 0 for the spun off shares, and I usually sell it immediately. If there is a CIL, I subtract that amount from the basis of the mother company. I don't know whether this is legal, but I think it is fair and it certainly is simple, and I would be surprised if the IRS would care. Any comments?
What is "CIL"?
The bottom line is that you have to divide up your pre spin-off cost basis between the parent and child somehow. I think you're describing that you just keep all the cost basis in the parent. This seems reasonable, but you'd have to check with a tax professional to make sure this is legal/acceptable. (I'm not a tax professional...).
That's exactly what I am doing. CIL is Cash in Lieu of a fractional share. It seems to me that that equity should come out of the parent company. Years ago I used to puzzle out the basis and get it right. It seemed like more trouble than it was worth. Thanks for your comment.
What I used to do -- before there was a spin-off dialogue:
I used to do three transactions:
1) a partial sale on the mother investment, at tax-neutral basis (that is, $0 capital gain, based on FIFO)
2) a $0 purchase on the mother investment, to reduce my cost-basis in that investment
3) a purchase of the new security, for an amount equal to the cost reduction of the mother investment
This would make the whole thing tax-neutral, and in addition make the cost basis for the new investment based on whatever I had originally paid for the mother investment. Problem is, it's a bunch of work (e.g., figuring out how many shares had to be in the partial sale to get the correct cost basis reduction), and it seems that I can now get the tax-neutral effect simply by assigning whatever cost basis I please to the new investment and then calling that "return of capital" from the mother investment. Doing that, I can simply use the CIL calculation to figure out the cost basis, and I'm done.
I think that passes muster!
Been trying to figure out cost basis for faripoint spin off and this page was one of the first listings in my most recent google search. I have since found the following very helpful
http://investor.verizon.com/shareowner/ ... sheet.aspx
scroll down to:
Special Note: Different methods for Calculating Tax Basis for Verizon and FairPoint Following the Spin-off and Subsequent Merger of Spinco into FairPoint
The next few paragraphs lay it out clearly and provide a sample calculation. It is very similar to the Idearc spinoff.
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