FAQ: Convert Share Class for Mutual Fund
In some mutual fund families, when an investor reaches some milestone of ownership in a particular fund, the investor's shares may be converted from one class of the fund to another class that typically has lower cost. Such milestones usually involve total amount invested in the fund or length of time the shares. In many cases, all the investor's shares are converted. In some circumstances, only shares that have been held for a certain period of time (perhaps 2 or 5 years) are converted. Usually the conversion only affects one account and not others (for example, shares held in your investment account are converted but not the shares of the same fund held in your spouse's IRA). The conversion may be one-for-one or may have some other conversion ratio applied. These conversions almost always tax-free and that is the context for this presentation.
Quicken does not have a specific single transaction to implement this type of conversion. The commonly accepted approach uses a Corporate Acquisition transaction. The old class shares (Class A for discussion purposes) are being acquired by the new class shares (Class
. When the user enters this transaction, Quicken will enter one Shares Removed transaction deleting all the Class A shares for the account and usually multiple Shares Added transactions adding Class B shares to the account-- one added transaction for each lot of the Class A shares originally held. This Corporate Acquisition process maintains the original cost basis and acquisition dates for all lots being held and will properly consider the share ratio that may be applicable.
If the user chooses to enter these transactions manually, the same result will be achieved although the risk of error is greatly increased. When a user enters a Corporate Acquisition transaction in any account, the process is applied in ALL accounts that currently held the acquired shares (Class A shares). This is often not appropriate. If the conversion is not applicable in some account, the user should simply delete the newly added transactions (Shares Removed and Shares Added) in the accounts for which the conversion/acquisition is not applicable. (Continued)
Quicken does not have a specific single transaction to implement this type of conversion. The commonly accepted approach uses a Corporate Acquisition transaction. The old class shares (Class A for discussion purposes) are being acquired by the new class shares (Class
If the user chooses to enter these transactions manually, the same result will be achieved although the risk of error is greatly increased. When a user enters a Corporate Acquisition transaction in any account, the process is applied in ALL accounts that currently held the acquired shares (Class A shares). This is often not appropriate. If the conversion is not applicable in some account, the user should simply delete the newly added transactions (Shares Removed and Shares Added) in the accounts for which the conversion/acquisition is not applicable. (Continued)
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If only certain shares are being converted within one account (say shares held longer than 5 years), the user may want to enter the Shares Removed and Shares Added transactions manually rather than through the Corporate Acquisition process. Using the Corporate Acquisition process would involve entering that transaction, then editing the newly added 'Shares Removed' transaction to reflect that only certain lots were removed, and deleting the 'Shares Added' transactions associated with more recent acquisitions.
It may be easier to manually enter a 'Shares Removed' transaction that properly identifies the lots being removed and one or more Shares Added transactions that indicate the Class B shares replacing the removed shares. In the Shares Added transaction be sure to specify correctly the original cost and acquisition date. These transactions will have an effect on certain performance metrics.
As you hold the new (Class
That is right. Each time you Buy Shares, a new cost basis gets established for the shares you just bought based on the price you just paid and the date of the transaction. The Shares Added transaction that the Corporate Acquisition invokes allows the basis to be separately specified and the date of acquisition can be different than the date of the transaction.
In my opinion, when there are partial conversions, the user is often better off entering the transactions manually rather than through a single Corp Acq entry followed by multiple deletions and edits. The user must (or should) take note of the shares being removed (converted) so that the like information_(basis and acq. date) are entered for the Add shares half of the entry process. You are right about the Corp Acq. action applying across all accounts. I had not noted the risk before of this occurring in hidden accounts, but then I only hide accounts after their balances are taken to zero - dollars and shares. In those cases, there are no actions entered in the hidden accounts._ I'm not sure why one would hide an account with assets in it, but I am likewise sure someone out there has some reason to do so. To repeat(?), in accounts where the conversion effect is not applicable, simply delete the remove Shares / Add_Shares transactions_that were entered by the general Corp Acq entry.
Ask no further...please post your question in the Quicken for Mac users forum.You have this posted in the Quicken for Windows users forum.
If you are looking in a Quicken "Single Mutual Fund" account, you will not see that transaction: a Single Mutual Fund account can only hold one security.To learn about the Corporate Acquisition transaction: look in Quicken Help (for "corporate acquisition")..To learn about how to deal with multiple securities in a Single Mutual Fund account: look in Quicken Help (for "single mutual fund").
Not a clear statement._ Are these reinvested dividends not included in your Quicken records? If not, why not? They should be if you are trying to keep complete records. If they are in your Quicken data, the conversion process is just the same (Remove shares and Add Shares), even if your fund family reports it as one lump sum action.
"How do I specify which lot?"
The Remove Shares window allows you to specify which lot of shares is being removed.
No, it's not addressed: Q2009 handles this the same as previous versions.
However, wouldn't these transactions muddle up the Investment Performance reports for the years involved? i.e. those lots that resulted from Dividends or CG reinvestments would now appear to be just additional purchases, thus not counted as investment income. Is there a solution for that?
As originally noted, some performance metrics can be affected. The impact that I see along the line you are inquiring is that the amount invested for the original shares will be different than the amount invested for the converted shares since the original shares had reinvestments and the converted shares are created through ALL 'add shares' transactions. That difference in amount invested will lead to differences in ROI and perhaps other parameters. I do not know of a clean direct alternative approach. Properly constructed, a report on Average Annual Return should be consistent and correct. You need to choose what is meaningful to you and relevant to your data. I do not see where this approach muddles up data 'for the years involved'. The conversion - Remove and Add shares - takes place in current time at one day in time, not back when the original transactions were entered. Again careful construction of reports across the conversion time is necessary to get meaningful results. Reports for times before the conversion or after the conversion should not be affected.
Is Intuit ever to add a Convert Share Class transaction?
Why do you ask other users what the corporate plans are? Nobody posting here has any information relevant to your question. Intuit does not share their future development plans. I have seen Intuit employees post here that one of their development considerations is existence of a viable workaround. It would not surprise me if Intuit rationalized that this approach represents a viable workaround for share class conversions, thus they would choose not to expend resources to develop a separate tool. Note that any specific tool so developed has to address all the subtleties or carry all the flaws of the current workaround. The more subtleties that are deemed necessary to address, the greater the development cost.
Your problem is that you set it up as a 'single' mutual fund account. You should be able to change that setting (Overview tab for that account; account attributes area). Then you can implement the Corporate Acquisition approach.
I suggest you backup the file first incase you do not like the results. I also will not predict what other ramifications droppping the SMF setting will have on your personal setup and processing. I do not use SMF accounts finding their drawbacks (such as this) outweigh any advantages nor do I recommend their use. Ultimately, it will be your decision.
Quicken Forum/Community Contributor since 2005.