HCP Inc. split the company into HCP Inc. and Quality Care Properties Corp. The structure of the spinoff was the distribution of Quality Care Properties Corp as a taxable distribution.
The SEC filing for this spinoff (10-12B dated 6/17/2016) was found through a press release on the QCP web site.
This action will need at least two entries in the accounting software. The information below is based on the information available from QCP. Since both HCP and QCP are Real Estate Investment Trusts (REITS) the nature of the distribution will not be fully known until the end of their tax year. For both companies the tax year is the calendar year. Like all REIT distributions, you may need to re-characterize it when the full nature of the distribution is known. That is, some part of the distribution may later need to be entered as return of capital, dividend and/or capital gain distribution.
The Dividend Entry
Go to Transactions > Dividend or Distribution or Accounting > Securities > Cash Distribution depending on the version of the software being used. Here is the information you need to complete the dividend entry.
Date: 10/31/2016
Select Transaction Type : Dividend or Distribution
Amount: [14.65 x .2 x (# of HCP shares owned)
# of QCP shares received = .2 x (# of HCP shares)
14.65 = opening price of QCP shares on the first regular trading day, 11/1/2016
For example if you owned 100 shares of HCP your amount would be
14.65 x .2 x 100 = 293
Ex Dividend date: 10/24/2016
Type : Dividend
Select Security: HCP Inc. (HCP)
Save the transaction and the dividend has been entered.
The Buy Entry
Go to Transactions > Buy or Accounting > Securities > Buy depending on the version of the software being used.
Here is the information you need to complete the buy.
Date: 10/31/2016
Select Security : Quality Care Properties Corp (QCP)
Number of Shares Bought : .2 x (# of HCP shares owned).
Net Total of Purchase: Use the same value as the Amount from the dividend entry above.
Be sure to use the same cash account for the Dividend entry and the Buy entry.
If your buy transaction included fractional QCP shares, continue to the next step. If not, you are done with this spinoff.
The Sell Entry
Go to Transactions > Sell or Accounting > Securities > Sell depending on the version of the software being used.
Here is the information you need to complete the sell.
Date: 11/1/2016
Select Security : Quality Care Properties Corp (QCP)
Number of Shares Sold : The fractional part of the shares bought in the Buy Transaction.
Net Proceeds: Use the cash-in-lieu amount from your broker statement.
When saved you are finally done with all transactions related to this spinoff.
NOTE: It is quite likely you will need to edit the distribution (dividend) entry after receiving information from HCP and/or QCP on the true nature of the distribution entry dated 10/31/16. This is normal for distributions from REITS. The information needed to re-characterize REIT distributions usually comes January/February of the following tax year.
The price of QCP in these instructions was chosen to lessen possible tax consequences of this spinoff. Your broker may use a different price, such as the closing price on 10/31/16. This will result in a different cost basis for QCP recorded in your records as compared to your broker’s records. This is not an issue to cause worry. Tax forms have an entry area to reconcile small difference between your records and your broker. This reconciliation is automatically completed in the normal operation of ICLUBcentral tax printer software.
