Rounding errors after stock Split Transaction

Legacy KB ID: 4269

Question

The company I have shares in has undergone a corporate restructure which has lead to a reduction in the number of shares in the company.  The value (cost basis) of my holdings is staying the same.  I used the Stock Split option in Quicken but now my share holdings differ from the expected number of shares by a fraction of a share.  What can I do?

Answer

This difference is created by rounding of the ratio of the old shares to new shares. Some ratios (eg 1/3 or 0.333333333...) are infinitely repeating decimals and must be rounded at some point causing a loss of mathematical precision in the share calculation. Quicken attempts to be as accurate as possible but this may not match the whole number of shares assigned to you. The difference is usually a fraction of a share but will be visible when an odd number of shares are involved.

This issue also applies to a standard stock split where the number of shares are increased. 

Workaround

Sell the existing shares at the purchase price then buy the new shares at a price equal to the original purchase amount.

Example

Original transaction:  Buy 40,011 shares at $1.00 for $40,011

Later, receive 1,075 new shares for the 40,011 old shares.  Value (cost basis) to remain the same:

1.    Sell the old shares at $1.00

2.    Buy the new shares at 40,011 x 1 divided by 1,075 = $37.219535

3.    See that Quicken now lists 1,075 shares at $37.219535 for a Cost Basis of $40,011

4.    On each transaction enter a memo to describe the reason for the action.

5.    If you need to preserve the original date, then do the transactions at the date of the original transaction.