Reference Manual: Appendix C Securities Transactions The Lackner Group, Inc. 6-in-1 for Windows and Macintosh Patent Pending The Lackner Group, Inc. Carnegie Office Park, Suite 290 700 North Bell Avenue Pittsburgh, PA 15106-4322 Telephone: (412) 279-2121 Fax: (412) 279-6426 Web Site www.lacknergroup.com 2006 by The Lackner Group, Inc. All Rights Reserved.
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FOREWORD This document is current as of the date shown in the lower left-hand corner of the cover page. As significant changes to the program or procedures are made, the manual will be updated or a Supplemental document will be made available. Every effort has been made to provide current screen shots of transactions, schedules and documents in the examples. However, there may be minor differences due to the later addition or removal of a field or button. This document was initially created using Microsoft Word XP and is currently distributed in PDF format. Updates and future documents will be created in Adobe FrameMaker 7.2 and it is anticipated they will be published in PDF format and available on The Lackner Group, Inc. web site in HTML + CSS format. The PDF version contains bookmarks. This manual is also available in a printed version. Please contact the Sales Department for additional information.
APPENDIX C: Securities Transactions... 1 STOCK TRANSACTIONS... 1 Receipt of Asset and Subsequent Sale... 1 Name Change... 7 Spin-off...10 Dividend Reinvestment...14 Original Asset Entry...14 Dividend reinvestment (purchase of principal asset - Code 18.96)... 15 Long Term Capital Gain Reinvestment (Code 18.98)... 15 Short Term Capital Gain Dividend Reinvestment (Code 18.97... 16 Dividend Reinvestment (Purchase of INCOME asset - Code 18.99)... 16 BOND TRANSACTIONS... 19 Acquisition Transaction...19 Prorated Interest...21 Accrued Interest...24 Post-Death Interest...24 Sale Transaction...25 CUSIP NUMBERS...28 APPENDIX C INDEX...29
APPENDIX C: Securities Transactions STOCK TRANSACTIONS Receipt of Asset and Subsequent Sale Facts: Decedent owned 10,000 shares of Ford Motor Co. Common Stock. The date of death price per share was 13.21 (Total Value: $132,100.00). The estate will use the date of death value for 706 purposes. The Estate sold the security on 07/11/2005 for $14.00 per share (Gross sales price: $140,000.00). The brokerage sales fees were $500.00 (net proceeds of sale: $139,500.00) Receipt of Stock 1. Create a new transaction by clicking on the New Trans button. 2. Enter the name of the transaction. Use less than 43 characters in the name field. In the 6-in-1 for Windows and Macintosh program, the name field is used to link related transactions, e.g., the acquisition of a stock and its sale or other disposition, for accounting and fiduciary income tax purposes. For each DIFFERENT asset, be sure the name of the transaction is unique. For this sample, the transaction is named Ford Motor Co. Common Stock. 3. (Optional) Enter in the Additional Description field any other information desired. 4. Enter the code to be assigned to the transaction. If you know the code, you may either type it in directly. If you do not know the code, there are several ways to find it. In this example, we will use the Code Details method. Click on the Code Details button to access the screen shown on the next page. Revised 05/04/2006 APPENDIX C Page 1 of 29
5. To find the code for a stock, for example, click on the S. A list limited to all keywords for codes beginning with the letter S appears. In most cases, the entire list will be visible, but if it is not, use the scroll bar on the ride side to view more keywords. 6. Click on the keyword for the code desired to highlight and select it. Here the keyword Stock is highlighted. Click on the button labeled BACK to return to the main transaction screen. Notice that the code and the default assignments for the various modules have been automatically made. Also, because the code is for a stock, the transaction type is, by default SL. 7. Enter the number of shares and price per share. The total value (amount) will be automatically entered. Note: If you are given only the number of shares and the total value of the security, skip the Price field and enter the total value. Then click the Set Price button that will appear next to the Price field. Revised 05/04/2006 APPENDIX C Page 2 of 29
The transaction is complete. The item will now appear on the schedules indicated for the appropriate modules (706, State Death Tax, Inventory and Account). It also now appears in the Navigation Panel on the list of transactions for this Estate. Sale Transaction Create a new transaction to record the sale. 1. The name of the sale transaction must be EXACTLY the same as the original transaction. If it is not, the transactions will NOT be linked and you will have incorrect results for fiduciary tax and accounting purposes. To insure the name is entered correctly, use the drop-down arrow to the left of the name field to select the name. 2. Enter the code for the sale. If you know the code, you may type it in directly. If you need to look it up, you may use the Code Details approach (described above) or one of several other methods. For this transaction, a method is described below and illustrated on the next page. Click on the button labeled Categ found on the main transaction data entry screen. Clicking on the left half of the button brings up a list of all the categories. Clicking on the right half of the button produces a pop-up list showing the only the first letter of the keywords. The process to locate a Capital Gain/Loss code using the Categ button is shown below. The same basic procedure is used when the Categories or Keywords button is clicked. Revised 05/04/2006 APPENDIX C Page 3 of 29
CLICK ON LEFT HALF CLICK ON RIGHT HALF Select the code that is appropriate for the transaction. 3. Enter the date of sale. The date of sale must be at least one day subsequent to the date of acquisition for the program to track the basis. You do not need to specify that an asset was sold or disposed of within 6 months for alternate valuation purposes and that code no longer appears as an option. Revised 05/04/2006 APPENDIX C Page 4 of 29
4. Enter the number of units and price per unit. The amount (total value) will be automatically calculated. If the price per unit is not known, enter the number of units and the Amount. Then click the Set Price button (appears next to the Price field) and the program will automatically calculate the price per share based on the information you entered. In this example, the net proceeds of sale have been entered in the amount field. (If the gross proceeds are entered, use the Expenses of Sale field near the bottom left side of the Main data entry screen.) Price calculated Net proceeds Modify bank date (if necessary) 5. Enter the name of the account into which the proceeds were deposited. If the date the funds were deposited is different from the date of sale, modify the Bank Date. Basis is set automatically. Click on the 1041 button at the top of the Main transaction screen to verify that basis has been correctly set or to manually adjust it. The basis amount entered here will also appear on the State Fiduciary Tax Return and the Account data entry screens. It is suggested that you adjust he basis on the 1041 screen in most instances as that will automatically modify the results for State Fiduciary Income Tax Return and Account purposes. Setting the basis on either the Account or the State Fiduciary Income Tax Return screen does NOT automatically adjust the 1041 basis. [See the illustration on the next page.] Revised 05/04/2006 APPENDIX C Page 5 of 29
To manually adjust the basis, click on the 1041 button at the top of the Main transaction screen to go to the appropriate data entry screen. Click into the Basis field and enter the amount. The basis entered here will also appear on the State Fiduciary Tax Return and Account data entry screens. The gain or loss has been calculated and the amount field on this screen now shows the amount of gain or loss. Revised 05/04/2006 APPENDIX C Page 6 of 29
Name Change Task: Record a change of name for a security owned by the Estate. Facts: DOD: 01/01/2005 Asset: 10,000 shares of ABC Corporation Common Stock Price per share: $50.00 Total DOD Value: $500,000 Date of Name Change: 11/01/2005 New Name: XYZ Corporation Common Stock No. of Transactions Required : 2 Codes used: 17.88; 17.89 Where Entered: Transaction database Assumptions: User is familiar with the process of entering transactions in the transaction database Transaction to record receipt of ABC Corporation stock has already been created User has selected the estate/trust and has navigated to the Transaction database Comments: See the notes at the end of this example. Original Asset The Name Change (old name) Transaction 1) Create a new transaction. 2) Select the name originally used for the asset from the drop-down list next to the Name field. 3) Enter the code (17.88) for the name change (old name). 4) Enter the date the name of the security was changed. 5) Enter the number of units owned at the time of the name change. 6) Enter the original price per unit and the amount will be automatically calculated. Revised 05/04/2006 APPENDIX C Page 7 of 29
Name Change (Old Name) Transaction The descriptive text in the additional description field is NOT automatically entered by the program. It has been added here manually for clarification purposes. The Name Change (new name) Transaction 1) Create a new transaction. 2) Enter the new name of the security. 3) Enter the code (17.89) for the Name Change (New Name). 4) Enter the date the change was effective. 5) Enter the number of shares. 6) Enter the price per share. The amount will calculate automatically. Name change (New Name) The descriptive text in the additional description field is NOT automatically entered by the program. It has been added here manually for clarification purposes. Revised 05/04/2006 APPENDIX C Page 8 of 29
The Account results Principal Balance on Hand Schedule Change in Investment Holdings Schedule Name Change Notes If there have been no additions or changes (such as dividend reinvestment, sale or distribution of some of the units) to the original block of stock, a shortcut method to achieve the same results as described above would be: 1. Copy the original transaction. 2. Change the code in the new transaction to 17.88. 3. Change the date in the new transaction. 4. Make any desired changes in the additional description field in the new transaction. DO NOT change the name in any way. To do so will break the link between the two transactions and you will not achieve the correct result. 5. Copy the new transaction to create the name change (new name) transaction. 6. Change the name field to reflect the name of the new transaction. 7. Make any changes to the additional description desired. 8. Change the code to 17.89. If there have been additional shares acquired through dividend reinvestment or shares sold, be sure to enter the number of shares owned at the time the name change took place. Revised 05/04/2006 APPENDIX C Page 9 of 29
Spin-off Task: Record a spin-off for a security owned by the Estate or Trust. Facts: DOD: 1/01/2005 Asset: 5,000 shares of LMN Corporation Common Stock Price per share: $10.00 Total DOD Value: $50,000 Date of Name Change: 04/10/2005 Name of Spin-off Co: PQR Corporation Common Stock Reduction in Basis Of original security: $4,000 No. of shares issued In Spin-off Corp: 125 No. of Transactions Required : 2 Codes used: 17.68; 17.69 Where Entered: Transaction database Assumptions: User is familiar with the process of entering transactions in the transaction database Transaction to record receipt of LMN Corporation stock has already been created User has selected the estate/trust and has navigated to the Transaction database Comments: See the notes at the end of this example. Original Asset Revised 05/04/2006 APPENDIX C Page 10 of 29
The Spin-off (old name) Transaction 1) Create a new transaction. 2) Select the name originally used for the asset from the drop-down list next to the Name field. 3) Enter the code (17.68) for the spin-off (old name). 4) Enter the date of the spin-off. 5) Enter the amount by which the basis in the original security is to be reduced. Spin-off (Old Name) Transaction The Spin-off (new name/new shares) transaction 1) Create a new transaction. 2) Enter the new name of the security. 3) Enter the code (17.69) for the new security (spin-off - new name). 4) Enter the date the change was effective. 5) Since the price per unit is unknown (only the number of shares and total amount were provided), enter the number of units and the amount of the basis in the new, spun-off shares. 6) Click the Set Price button to set the price per share. Revised 05/04/2006 APPENDIX C Page 11 of 29
Spin-off (New Name and shares) The Account Results Principal Balance on Hand Schedule now shows the original security (with a reduced basis) and the newly issued shares of the new security. Change in Investment Holdings Schedule reflects the changes. Revised 05/04/2006 APPENDIX C Page 12 of 29
Spin-Off Notes To produce explanatory text on the Change in Investment Holdings Schedule (such as the descriptive text shown above), type in the desired text in the Additional Description field on the main data entry screen of the transaction. Schedule shown for Account results may vary if the State of Domicile is other than PA. The transactions and process are the same regardless of domicile. To calculate the price per share when only the number of units and the total amount are known, enter the number of units/shares and the amount. Click on the Set Price button to calculate the price per unit/share. Revised 05/04/2006 APPENDIX C Page 13 of 29
Dividend Reinvestment Description: This series of transactions includes examples of the following dividend reinvestment situations: Dividend: Purchase principal asset Long term capital gain: Purchase principal asset Short term capital gain: Purchase principal asset Dividend: Purchase income asset Please note: These transactions are GENERIC examples. Your situation may require customizing to meet the requirements of your jurisdiction or for tax purposes. Because the IRS has indicated the averaging convention is not to be used, the original asset and subsequent purchases are assigned different lot numbers. Facts: Original Asset (owned by Decedent): My Mutual Fund Number of shares: 1234.567 DOD price per share: $ 20.00 On 3/1/2005, a dividend was paid and was reinvested as a principal asset. On 6/1/2005, a long-term capital gain was distributed and it was invested as a principal asset. On 9/1/2005, a short-term capital gain was distributed and it was also invested as a principal asset. On 12/1/2005, a dividend was paid and it was reinvested as an income asset. Original Asset Entry Revised 05/04/2006 APPENDIX C Page 14 of 29
Dividend reinvestment (purchase of principal asset - Code 18.96) Lot # assigned to distinguish it from original, acquired shares There is NO deposit Long Term Capital Gain Reinvestment (Code 18.98) Different Lot # Note: Currently, you will need to suppress the 706 result No Deposit is made Revised 05/04/2006 APPENDIX C Page 15 of 29
Short Term Capital Gain Dividend Reinvestment (Code 18.97) New Lot # No Deposit Dividend Reinvestment (Purchase of INCOME asset - Code 18.99) New Lot # No Deposit Revised 05/04/2006 APPENDIX C Page 16 of 29
Account Results (PA/Model Account) Revised 05/04/2006 APPENDIX C Page 17 of 29
Revised 05/04/2006 APPENDIX C Page 18 of 29
BOND TRANSACTIONS Facts: Decedent owned a $50,000 bond issued by ABC Corporation. The date of death price per unit was $102.50 (Total Value: $51,250). The estate will use the date of death value for 706 purposes. The bond pays interest semiannually at the rate of 6% and payment dates for interest are 08/15 and 02/15. The Estate sold the security on 07/11/2005 for $51,500 (unit price of $103). Acquisition Transaction 1. Create a new transaction by clicking on the New Trans button. 2. Enter the name of the transaction. Use less than 43 characters in the name field if possible. In the Windows/Mac 6- in-1 program, the name field is used to link related transactions, e.g., the acquisition of a bond and its sale or other disposition, for accounting and fiduciary income tax purposes. Note: The name field replaces the function of abbreviations. For each DIFFERENT asset, be sure the name of the transaction is unique. For this sample, the transaction is named ABC Corporate Bond. 3. (Optional) Enter in the Additional Description field any other information desired. 4. Enter the code to be assigned to the transaction. If you know the code, you may either type it in directly. If you do not know the code, there are several ways to find it. In this example, we will use the Code Details method. Click on the Code Details button to access the screen shown on the next page. Revised 05/04/2006 APPENDIX C Page 19 of 29
5. To find the code for a bond, for example, click on the B. A list limited to all keywords for codes beginning with the letter B appears. In most cases, the entire list will be visible, but if it is not, use the scroll bar on the ride side to view more keywords. In this example, I have entered Bo in the yellow search field. Click the Back button to return to the data entry screen 6. Click on the keyword for the code desired to highlight and select it. 7. Click on the button labeled BACK to return to the main transaction screen. Notice that the code and the default assignments for the various modules have been automatically made. Also, because the code is for a corporate bond, the Type of transaction has been set to BC. It is the selection of the type that controls how the transaction will appear on tax returns and other documents (e.g., $50,000 ABC Corporation Bond) 8. Enter the number of units and price per share. For a bond, enter the face value of the bond divided by 100. In this example, the number of units is 500. The total value (amount) will be automatically entered. Revised 05/04/2006 APPENDIX C Page 20 of 29
You have completed the basic entry for a bond owned by the Decedent. The item will now appear on the schedules indicated for the appropriate modules (706, State Death Tax, Inventory and Account). It also now appears in the Navigation Panel on the list of transactions for this Estate. There are two ways to enter the pre-death (accrued) and post-death (income to the Estate) interest for a bond. You may enter the two items in one transaction using the Prorated Interest option or you may enter two (2) transactions: One for the accrued interest and the second for post-death interest. Where you are given specific values for the accrued interest, you will use the second method. The prorated interest method automatically allocates the total interest received for the period. Prorated Interest In this example, the interest rate is 6% and interest is paid semi-annually on 8/15 and 02/15. 1. Create a new transaction. 2. Enter the name of the transaction. Since the transaction must be linked to the original transaction for the accrued interest portion to be reflected on the tax returns, the Account and the Inventory, the name used for this transaction must be EXACTLY the same as that used for the initial entry. It is strongly suggested that you select the name for this transaction from the drop-down list that appears when you click on the downarrow next to the name field. 3. Select the appropriate prorated interest code from categories, keywords or Code Details. Code 19.78 is the prorated interest code for a corporate bond. Revised 05/04/2006 APPENDIX C Page 21 of 29
A blue button labeled Prorated Interest will appear just to the left of the Units and Price fields as shown here. 4. Click on the button to navigate to the screen for entry of the rate, etc. In this illustration, the number of units (500), the rate of interest (6%) and the date of the last payment before the decedent s death (08/15/2004) have been entered. The annualized interest has been automatically calculated as well as the next payment date. Because the type of transaction is shown as a bond (BC), the program has assumed a payment frequency of Semi- Annual. At this time, no amounts have been allocated to preand post-death. Click on the Set Amount button to do this. The results are shown here. 5. Click the blue Go Back button on the left side of the screen to return to the transaction main data entry screen. Revised 05/04/2006 APPENDIX C Page 22 of 29
6. To complete the transaction, be sure to enter the bank date and the name of the bank/cash account into which the interest was ultimately deposited. In this Estate, there is a Wachovia account and the interest was deposited to it on the day it was received (02/15/2005). Shown below is the completed transaction. The bond and accrued interest will now appear on the appropriate death tax returns and the Inventory. The accrued interest will appear with the asset on the Principal Receipts Schedule of the Account and the post-death interest will appear as income for account purposes. Schedule B of the 706 Revised 05/04/2006 APPENDIX C Page 23 of 29
Principal Receipts Income Receipts Accrued Interest 1. Create a new transaction. 2. As described above, enter the name of the transaction using the drop-down list next to the name field. Remember not to make any changes in the name or the transactions will not link properly. 3. Select an accrued interest code that is appropriate to your situation. The code 19.24 was used for this sample. 4. Enter the amount of pre-death interest. 5. Enter the bank information (date and bank name) when the funds are actually received. The completed transaction appears below. The results for the tax schedules, Inventory and Principal Receipts of the Account are the same as shown previously. Post-Death Interest The post-death interest would be handled in a separate transaction using the appropriate income interest code. Revised 05/04/2006 APPENDIX C Page 24 of 29
Sale Transaction 1. Create a new transaction to record the sale. The name of the sale transaction must be EXACTLY the same as the original transaction. If it is not, the transactions will NOT be linked and you will have incorrect results for fiduciary tax and accounting purposes. To insure the name is entered correctly, use the drop-down arrow to the left of the name field to select the name. 2. Enter the code for the sale. If you know the code, you may type it in directly. If you need to look it up, you may use the Code Details approach (described above) or one of the other methods. Click on the button labeled Categ found on the main transaction data entry screen. Clicking on the left half of the button brings up a list of all the keywords. Clicking on the right half of the button produces a pop-up list showing the only the first letter of the keywords. The process to locate a Capital Gain/Loss code using the Categ button is shown below. CLICK ON LEFT HALF CLICK ON RIGHT HALF Select the code that is appropriate for the transaction and enter the date of the sale. Revised 05/04/2006 APPENDIX C Page 25 of 29
You do not need to specify that an asset was sold or disposed of within 6 months for alternate valuation purposes. 3. Enter the number of units and price per unit. The amount (total value) will be automatically calculated. If you do not know the price per unit, skip the Units and Price fields and enter the Amount. Then click into the Units field and enter the number of units. Use the <Tab> key to exit the field and the Price will be calculated. If you have expenses of sale that affect the amount of gain or loss, use this method. Enter the net proceeds of sale in the Amount field first. Then enter the number of shares. The program will automatically calculate the price per unit. Price Calculated Net proceeds Modify bank date (if necessary) 4. Enter the name of the account into which the proceeds were deposited. If the date the funds were deposited is different from the date of sale, modify the Bank Date. 5. Basis is automatically set by the program. To verify the basis has been set, click on the 1041 button at the top of the screen and top of the Main transaction screen to go to the appropriate data entry screen to do this.. [See the illustration on the next page.] Revised 05/04/2006 APPENDIX C Page 26 of 29
The Amount field on this screen now shows the amount of gain or loss. The basis entered here will also appear on the State Fiduciary Tax Return and Account data entry screens. 6. Return to the transaction main data entry screen and modify the bank date if necessary and enter the name of the bank/cash account into which the proceeds were deposited. The relevant portion of the capital gains/loss schedule Change in Investment Holding Revised 05/04/2006 APPENDIX C Page 27 of 29
CUSIP NUMBERS A Securities Library with over 91,000 security names and CUSIP numbers is included with 6-in-1. You can use this library to find and enter a security s full name and/or CUSIP number. Facts: Security: 5,000 shares of Xerox Corporation Common Stock Per share value: $14.37 Objective: Enter a CUSIP number Steps: 1) Create a new transaction. 2) Enter the name of the security (Xerox Corporation) 3) Click on the CUSIP button (left side of screen near the top) 1 3 2 4) If the name of your security is not showing in the list, enter up to 12 characters in the yellow box and tab. 5) If necessary, scroll the list to find the security and click on it to select it. The CUSIP number will be entered. 6. Click the Back button to return to transactions. 6 4 5 Revised 05/04/2006 APPENDIX C Page 28 of 29
APPENDIX C INDEX Accrued Interest...24 Basis Date of Sale...4 Entering Automatically...5 Entering Manually...6 Troubleshooting...4 Bonds Original Entry...19 Prorated Interest...21 Sale...25 Capital Gain Reinvestment Code 18.98...15 Long-term...15 Short-term...16 Code Asset Sold Within 6 Months...4 Entering...1, 3, 19 Using the Categ Button to Find...3 CUSIP Numbers Adding...28 Dividend Reinvestment...14 Code 18.97...16 Code 18.98...15 Code 18.99...16 Income Asset...16 Principal Asset...15 Dvidend Reinvestment Code 18.96...15 Interest Accrued...24 Post-Death...24 Prorated...21 Long-Term Reinvestment Code 18.98...15 Name Transaction...1 Name Change... 7 Account Results... 9 New Name... 8 Notes... 9 Old Name... 7 New Transaction... 1 Post-death Interest... 24 Proceeds of Sale Depositing... 5 Prorated Interest... 21 Purchase of Income Asset Code 18.99... 16 Reinvestment Account Results... 17 Sale Date of Sale... 4 Expenses of Sale... 5 Stock... 3 Short-term Reinvestment Code 18.97... 16 Spin-off... 10 Account Results... 12 New Name... 11 Old Name... 11 Spin-Off Notes... 13 Stock Dividend Reinvestment... 14 Entering New Transaction... 1 Name Change... 7 Record Asset... 1 Sale of Asset... 3 Spin-off... 10 Transaction Name Entering... 19 Revised 05/04/2006 APPENDIX C Page 29 of 29