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Transaction Entry to Cover BEP-UN Reorganization

A recent reorganization for BEP-UN had a distribution of BEPC shares on a 1 to 4 basis with 1 share of BEPC issued for every 4 shares of BEP-UN held. I'm not clear on how to handle this transaction. Any guidance would be appreciated.

Comments

  • First, take a not of cost basis for your BEP-UN shares. I am assuming that for each BEP-UN in addition you got 0.25 shares on BEPC. Lets say you had 100 BEP-UN shares.
    First transaction would be SymbolTansferOut for BEP-UN, Price - transfer day price, CostBasisOverride - value of noted CostBasis.
    Second transaction would be SymbolTransferIN for BEP-UN, Price - new price after distribution, CostBasisOverride - 75% of original CostBasis, and rest of that 25% will go to BEPC.
    Third transaction would be SymbolTransferIn for BEPC, Price - new actual price, CostBasisOverride - 25% of original CostBasis.

    This is assuming that you want to properly allocate CostBasis between these shares.
  • Excellent!
    Thank you.
  • I'll offer an alternate solution:

    From https://bep.brookfield.com/bepc/stock-and-dividends/tax-information:
    "The special distribution should not be taxable to a Canadian resident shareholder for Canadian income tax purposes provided the adjusted cost base of the Brookfield Renewable Partners L.P. units held by the Canadian resident holder is positive after the special distribution.
    In general, this special distribution will reduce the adjusted cost base of your interest in the partnership units of Brookfield Renewable Partners L.P. by an amount equal to the fair market value at the time of the special distribution of the class A shares you have received. The same fair market value at the time of the special distribution of the class A shares received is your adjusted cost basis. The 5-day volume weighted average price (VWAP) ending August 6, 2020 of a share of Brookfield Renewable Corporation on the Toronto Stock Exchange was $58.28."

    So......
    First transaction would be SymbolTansferOut for BEP-UN, Price = spin-off day price ($74.01), CostBasisOverride = value of noted CostBasis. (No need to override if PS includes transactions to properly calculate ACB.)

    Second transaction would be SymbolTransferIN for BEP-UN, Price = Doesn't really matter because you will override. I used $56.47, CostBasisOverride = ACB of original BEP-UN minus ACB of new BEPC (see next line).

    Third transaction would be SymbolTransferIn for BEPC, Price = $58.28 (five day weighted), CostBasisOverride = no override. (ABC of BEPC = number of shares of BEPC received times $58.28.)

    The net result is the ABC of new BEP-UN plus new BEPC being equal to ABC of your old BEP-UN. That is, no tax effect from spin-off.

    I don't know with certainty that this is correct, but it seems right to me, and it stays true to the tax information provided on BEP's website.
  • Schooner, that looks good to me. Thanks for sharing!
  • I am working my way through this transaction, but have an additional question - what is the correct way to record the "cash in lieu" amount that is received for partial shares?
  • Cash in lieu is normally a dividend (so "Div" or "DivTA"), but if it decreases original capital gains, then "ReturnOfCapital" type of dividend.
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