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How to record a bond "cusip change/split" RRS feed

  • Question

  • I had a $20K muni bond with a CUSIP of XXXXXabcd that (probably in response to a partial recall in the near future) was divided and changed to identically titled bonds, $5K with CUSIP XXXXXefgh and $15K with CUSIP XXXXXijkl.   They have somewhat different market values, so I would want to keep them separate.    As this is a transaction with no tax consequences, I cannot simply record this as a simple sell/buy transaction.  Is there a way to record this transaction in Money and preserve the original cost basis? 
    Saturday, September 6, 2014 7:33 PM

Answers

  • Since the old CUSIP number no longer has any significance, you could simply change the details of the one you have now to include the new CUSIP.  Then create a "return of capital" transaction for 1/4 of our original basis.  Use this money to "buy" the 5K bond.

    Unless you want Money to figure the tax obligation when you sell the bond, the date should be irrelevant.  However, for US tax purposes, you acquired both of the new bonds on the date you acquired the original and that is the date I recommend.

    Conceptually, this is no different than receiving shares in company B when you own shares in company A and it splits off a portion of the business.

    • Marked as answer by bobjbkln Wednesday, September 10, 2014 12:50 AM
    Monday, September 8, 2014 8:17 PM
  • If I was using Remove/Add Shares I would use the date of the ACTUAL change.

    I always try and keep my Money activity to match what has happened in the real world.

    The "return of capital" method is equally valid.

    • Edited by AshleyST Tuesday, September 9, 2014 1:35 PM improve clarity
    • Marked as answer by bobjbkln Wednesday, September 10, 2014 12:50 AM
    Tuesday, September 9, 2014 1:30 PM
  • This is compatible with what the others have said. Since it appears that Spinoff does not work with bonds, then you are left with some other method. http://support.microsoft.com/kb/179585/en-us gives examples of the techniques farther down the document.
    • Marked as answer by bobjbkln Wednesday, September 10, 2014 7:44 PM
    Wednesday, September 10, 2014 2:37 PM
    Moderator

All replies

  • You could use Remove/Add shares.
    Monday, September 8, 2014 8:16 AM
  • Ashley,

    Thanks for your response.  Is this what you are suggesting?

    1) Remove all $20K shares from CUSIP XXXXXabcd.  Leave the price in remove shares as blank.

    2) Create two new bonds with (CUSIPs XXXXXefgh and XXXXXijkl) both with zero starting amounts

    3) Add $5K and $15K shares with the original unit cost (the bonds were bought at a premium) listed as the price.

    Question: What date should I use for the transactions listed in #3, the date of the original acquisition or the date the exchange took place?  What are the consequences of either choice?

    Monday, September 8, 2014 3:58 PM
  • Since the old CUSIP number no longer has any significance, you could simply change the details of the one you have now to include the new CUSIP.  Then create a "return of capital" transaction for 1/4 of our original basis.  Use this money to "buy" the 5K bond.

    Unless you want Money to figure the tax obligation when you sell the bond, the date should be irrelevant.  However, for US tax purposes, you acquired both of the new bonds on the date you acquired the original and that is the date I recommend.

    Conceptually, this is no different than receiving shares in company B when you own shares in company A and it splits off a portion of the business.

    • Marked as answer by bobjbkln Wednesday, September 10, 2014 12:50 AM
    Monday, September 8, 2014 8:17 PM
  • If I was using Remove/Add Shares I would use the date of the ACTUAL change.

    I always try and keep my Money activity to match what has happened in the real world.

    The "return of capital" method is equally valid.

    • Edited by AshleyST Tuesday, September 9, 2014 1:35 PM improve clarity
    • Marked as answer by bobjbkln Wednesday, September 10, 2014 12:50 AM
    Tuesday, September 9, 2014 1:30 PM
  • The problem with using the date of the actual change is that the annual income/appreciation will be totally off and I will lose all of the price changes that I have meticulously recorded monthly.  I think that what I will do (after making a copy of my existing file) is to use Barry-Schwarz's suggestion but make the ROC action on day one.  I will put the actual transaction date in both memos.  Hopefully this is as close as I can come to the actual situation using Money,
    Wednesday, September 10, 2014 12:50 AM
  • This is compatible with what the others have said. Since it appears that Spinoff does not work with bonds, then you are left with some other method. http://support.microsoft.com/kb/179585/en-us gives examples of the techniques farther down the document.
    • Marked as answer by bobjbkln Wednesday, September 10, 2014 7:44 PM
    Wednesday, September 10, 2014 2:37 PM
    Moderator
  • This was helpful, but since the basic example differed from my situation it was (for me) too difficult to use as a model.  I ended up using Barry-Schwarz model with one tweak. 
    Wednesday, September 10, 2014 7:48 PM
  • I followed your suggestion except that in addition to the Return of Capital transaction I also did a "Remove Shares" of 5000.  Makes sense to me to reduce the nominal bond value of CUSIP XXXXXijkl  to $15K.
    Wednesday, September 10, 2014 7:55 PM