How Can I Record Motorola Stock Reverse Split into 2 New Companies?

Motorola stock reverse split itself into two companies: my 692.95 shares of MOT became 98.5 shares of MSI and 86.5 shares of MMI. How do I go about recording such a reverse split? Or must I "sell" all my shares of MOT & purchase the appropriate shares of the two new companies, which will work, but also set up false tax considerations. Thanks for any help.

Answer

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Thank you for the info, miklk.  Here is a link to the MSI presented pdf file:
http://files.shareholder.com/downloads/ABEA-2FO3VV/1119424856x0x433969/A1D1332E-B840-43AC-8A90-C73CD8FD0043/MSI_MMI_Tax_Basis_Allocation_FINAL_-_January_2011.pdf

Based on that information, I would proceed as follows.  This is slightly more complicated that I first alluded to because I had forgotten certain aspects of Quicken's Corporate Spinoff Transaction I dislike.

Corporate Spinoff transaction
Transaction Date = 1/4/2011
Security Name = Motorola (or however you have it named)
New Company = Motorola Mobility
New Shares issued = 0.125
Cost per old share = 5.33
Cost per new share = 31.17
Taxable Spinoff box should NOT be checked

When this macro-transaction is entered into Quicken, the program will create a RtrnCap transaction and a Buy Shares transaction dated to match for each time you acquired MOT shares.  I do not like that timing and begin a series of adjustments to overcome that sequence.

Adjustment 1:  Redate each RtrnCap and Buy Shares transaction to 1/4/2011.

The buy transactions now show you are acquiring shares of MMI on 1/4/2011.  That is not accurate.  As far as the IRS is concerned, you acquired the shares when you acquired the original MOT shares.

Adjustment 2:  Edit the Buy Shares of Motorola Mobility to be Add Shares transactions with the Acquisition date matching the date the related shares of MOT were acquired.

The RtrnCap proceeds had been used to buy the shares of MMI.  There is no longer a MMI buy so the RtrnCap money also must go away.   

(It is often best to redate and revise the Quicken-generated Buy in one step to keep the date information at hand during the process.)

Adjustment 3:  Edit the RtrnCap transaction by adding in a transfer Account that is the same as the originating account (the account you are entering these transactions).  

At this point, it is worthwhile to make a check.  I do this by looking at the cost basis before and after.  On 1/3/2011, the portfolio view should show your cost bais for MOT.  For 1/4/2011, the total cost basis of MOT and MMI should equal that prior basis and be in the correct ratio of about 58% to 42%.  

On to the reverse split and name change.  After due consideration, I would probably enter this as a Corporate Acquitition:
Transaction date = Jan 4, 2011
Company Acquired = Motorola
Acquiring Company = Motorola Solutions
New Shares Issued  = 0.142857
Price per share = 39.77 (closing price on 1/4/2011)

You will find this enters a Remove Shares transactions (for MOT) and one or more Add Shares transactions (for MSI) corresponmding to each lot od MOT you had held.  You may find that the ratio is not sufficiently accurate.  For example, in my test file, I started with 56 shares of MOT and ended with 7.999992 shares of MSI.  To correct this, simply edit the Add Shares transaction accordingly.  I changed the 7.99992 to 8.  

You can improve Quicken's math by choosing the StkSplit apprach which allows you to specify the split was 1 new share for every 7 old shares.

It is now appropriate to recheck the portfolio view.  You should now find that the cost basis for Motorola Solutions for 1/4/2011 reflects what had been the cost basis for Motorola.  

It is also reasonable to check you security information.  Ctrl-Y will pull up the security list and you can sheck that MMI and MSI are bothe suffieciently defined.  

Finally, it is possible that through this process, you are now showing fractional shares of either MMI or MSI.  In all likelihood, you broker will be required to sell those fractional shares and you will receive cash-in-lieu for those partial shares.  Those should be entered into Quicken as Sells of the corresponding security.  Because you have guided Quicken to the proper cost basis, the proper capital gains or losses will be relfected for your 2011 tax data.  

HTH
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