tag:infinitekind.tenderapp.com,2009-01-14:/discussions/investments/439-how-to-record-a-merger-in-an-investment-accountInfinite Kind: Discussion 2018-03-17T07:25:50Ztag:infinitekind.tenderapp.com,2009-01-14:Comment/382538032015-10-23T22:31:41Z2015-10-23T22:31:41ZHow to record a merger in an investment account<div><p>This is difficult in that the Kraft Heinz company is a new
security with a new ticker and unique ID.</p>
<p>You should have received some indication from your broker as to
how they handled the merger. Usually this is a sale of the old
security at cost basis and a buy into the new security at the cost
basis. And yes, you do lose you old transaction history. The
important part is retention of cost basis.</p>
<p>The steps are similar to a stock spin off as listed in this
FAQ:</p>
<p><a href="http://help.infinitekind.com/kb/investments/how-to-account-for-a-stock-spin-off">
http://help.infinitekind.com/kb/investments/how-to-account-for-a-st...</a></p>
<p>Tom Freeman<br>
Infinite Kind Support</p></div>Tom Freemantag:infinitekind.tenderapp.com,2009-01-14:Comment/382538032015-10-24T08:09:05Z2015-10-24T08:09:05ZHow to record a merger in an investment account<div><p>Tom,</p>
<p>For information, in Australia, this is only one of the ways
company mergers can be dealt with. It generates a capital gains
event in the year of receipt and thus has to be dealt with as far
as Taxation goes.</p>
<p>To record a sale at the cost price and then a purchase at this
same cost price creates other issues. The original purchase date
along with a (real) sale date determines how a capital gain is to
be dealt with and also importantly how to calculate the gain and
thus how much tax is payable.</p>
<p>We have here what is called capital gains rollover relief
– so it defers capital gains until you really sell the
securities.</p>
<p>How it works is there is a stock for stock issue – like a
stock swap, it may be on a 1 for 1 basis but it could also be and
is more likely to be on a different basis, so there could also
effectively be a stock split involved, the original cost is
preserved along with the original purchase date but the cost per
share could be different as happens with a stock split.</p>
<p>So handling this as a sale and a purchase loses required detail,
it also loses the original lot information, unless you enter
multiple purchases to represent each lot but you need to manually
calculate the number of shares assuming it is not on a 1 for 1
basis.</p>
<p>Really this type of event is something that MD should be
handling for the user.</p>
<p>FWIW Quicken does handle it correctly it also copies price
history to the new security if desired.</p>
<p>Des</p></div>dwgtag:infinitekind.tenderapp.com,2009-01-14:Comment/382538032015-10-31T17:21:25Z2015-10-31T17:21:25ZHow to record a merger in an investment account<div><p>Tom,</p>
<p>I read the instructions on recording spin-offs previously. This
is not an appropriate way to record such transactions. You indicate
that, “you should have received some indication from your
broker as to how they handled the merger.” Well, that would
be a memo entry only. That’s it and that’s the normal
practice on a brokerage statement. You say that, “usually
this is a sale of the old security at cost basis and a buy into the
new security at cost basis.” This is not correct. There is
never a buy or sell shown on a brokerage statement in such a
situation. There are a number of different types of situations
involving investments in equities (such as mergers, spin-offs,
stock splits and stock dividends) that cannot be appropriately
accounted for using the transaction types that Moneydance presently
offers. Recording a sale and a purchase is not an appropriate way
to record such transactions. Trying to back into these things with
sales and purchase transactions creates a mess. Des is correct that
this losses key data, especially the holding period. It also wreaks
havoc with rate of return calculations. These transaction types
need to be provided for within the software in order to have
something which truly addresses the accounting needs of individual
investors. By the way, I am a CPA and have been an individual
investor for over 30 years. I used Quicken (Windows) for many years
and it does handle these transactions. Since Intuit doesn’t
really support Apple OS, I have been giving Moneydance a try.
Although a good product in many respects, this is one area where it
falls short. Thanks for listening.</p></div>Pat Jones