Sometimes companies spin-off an affiliate (example below). How to record the new stocks in KMyMoney?

Regards

Al_

Example:
Carrefour (French supermarkets and the like) gets rid of Dia (Spanish affiliate), see http://www.carrefour.com/cdc/finance/sp ... ratio.html

Holders of Carrefour shares get 'free' Dia shares, in this case 1 Dia share per 1 Carrefour share (ratio may be different from 1:1 in other spin-offs). How to record this in KMyMoney? If simply adding the new shares, then the profit on a future sell of these shares is overstimated (because purchase price is zero) and the profit on a future sell of Carrefour is underestimated (the suddden drop in value on the day of the spin-off is neglected)

If you were to sell those free shares, what would you declare when filing your income taxes? You can call and ask your local tax office, or your banker/broker. Chances are, the entire selling price would be considered a gain. If so, you should indeed enter these share with a purchase cost of zero. If you want to avoid being overtaxed, you should then sell a Carrefour share for every Dia share you sell. In any case, I would try to enter these shares in a way that is compatible with the taxation that applies to them, because any artificial transaction (sell and buy back..) will necessarily result in an incorrect taxable gain.

Matching the tax situation is indeed an important consideration. Thanks for this suggestion. I realize that there is inherently no 'correct' way to record such transaction, not due to limitations in KMyMoney. If zero purchase costs are entered then the tax situation is reflected correctly; if e.g., the opening share price of the spin-off is entered then the performance of both shares is correct.

In some sense, these new shares are the same as the shares you would get if there were a split in the stock - and I wonder it they are better recorded as "buy shares" for a cost of 0 or as "add shares" ?

Good point. Theoretically, after some considerations, I believe the optimal recording of such transactions: record new shares as buy using the share price on the first trading day. This gives a spurious (negative) entry in the cash portion of the account; this needs to be compensated by entering a dividend payment in the same amount from the parent company.

I dislike any approach that requires creating a transaction that isn't real and is just required to balance the books, especially if you can do it without.

I think one of the difficulties here is that KMM doesn't really record the basis for any stocks, other than the purchase price, and so calculating the tax implications when you sell is going to take some manual effort no matter what.

I agree with ostroffjh. I would not introduce nonexisting transactions, because that introduces errors in all kinds of reports and other derived calculations. I would tend to use Add Shares here, because you did not issue a purchase order for these shares. Whether you use Buy or Add is not really important.