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adjust cost basis of stock sold

unknown

Franklin Templeton records mutual fund sales at average cost of noncovered shares held. (They average covered shares separately.) I do not particularly have a problem with that. My problem is that I would like the cost in Quicken to match the cost computed the way FT does. I believe Quicken is using FIFO, which I may well have selected when the transaction was downloaded and accepted.

How do I adjust the cost basis Quicken is using for the sale so that at least my total cost basis will match FT's total cost basis.?

Using Quicken Windows 2016

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Comments

NotACPA

Not sure what you mean by "covered shares" vs. "non-covered" shares. Do you have them, in some way, recorded differently in Q?

For mutual funds, 'Average Cost' is one of the options that you can specify when you 1st set up the security ... you can't specify it on the individual sales transactions. I don't know what happens if you try to specify it now, after the fund has been set up and sale transactions recorded.

Be SURE to take a backup before you go an attempt this ... just in case.

unknown

Cover vs Noncovered is a tax distinction, which I think Quicken should be including in its computations, or at least have as an option.

Covered shares of mutual funds are those purchased 2012 or later. Noncovered are purchased 2011 or earlier. The fund company (or brokerage) must report cost basis of sold covered shares on the 1099-B it issues, but should not report cost basis for noncovered shares. Franklin Templeton is reasonably treating the two groups of shares separately with average cost computed for each group. When covered shares are sold, that cost will be reported to the IRS, and the taxpayer should report that as the cost when computing capital gain (or whatever).

Since the ones I sold are noncovered, I can report any cost I can justify without worrying about what FT told me. (It didn't tell the IRS anything.) Since the difference is not large and it is easier if my records agree with FT, I am willing to report the number FT is using, but I want Quicken to have the same data.

Even if I were able to go back and specify average cost for the security (which I suspect is done when I enter the first sale), that average would be of all shares, not just noncovered shares, so that method would not give me a matching amount to FT.

If I can't manage the cost basis in the sale in Quicken, I may decide to report the Quicken number on my return and then keep using the Quicken number on future sales. That's not my preferred approach, but it will work on noncovered shares. It will NOT work on covered shares.

Thanks for the reply. Sorry about the length of the explanation.

Jim_Harman

Covered and non-covered are for Sched. D on your taxes. For shares you have held a long time ("Non-covered"), the brokerage was not required to track the individual lots but just the average. More recently, they have been tracking the individual "covered" lots.

I think in Quicken it is all or nothing per security whether it uses average cost or individual lots. Maybe you can create two versions of the same fund, one covered and one not. and have it average them separately, but then you have to specify which version you are selling, and your share balances won't match if you are downloading.

NotACPA

As you use the term, I'm familiar with covered/non-covered as it applies to stocks ... as I have a stock to which it applies because it was purchased in the1980's ... and all of my mutual funds are in IRA accounts, so it doesn't apply.

I'm not positive about this ... but maybe you can set up the one group or the other with a slightly different name ... but the same stock symbol (so the current price will still be available) and specify BOTH as using "Average Cost". Then you just sell from which ever "name" you want.

Take a backup before trying this.

unknown

Thanks again for the reply.

Somewhat to my surprise, I was able to add a new security with the same symbol. There would still be problems, at least because the number of shares in Quicken will not match the online number of shares. I think that would mean entering each transaction manually. It would be quite tedious to do all this hand work for each mutual fund I hold in a taxable account.

I have realized that the approach of just using the Quicken number on my tax return will also not work, when I get to selling covered shares where I pretty much have to report whatever FT reports.

So I still need to be able to tell Quicken what cost to use for a sale. Anyone have any ideas?

Jim_Harman

At Vanguard at least, for covered shares you can decide whether you want them to track individual lots or use the average cost method. When you sell, you tell them which lots to sell and that is what is reported at tax time.

Since Quicken is happy to track all the individual lots, that's what I do. You can still say "various" for the purchase date on Sched D if you have records in case of an audit. That way you can do tax loss harvesting or choose the highest cost lots when selling to minimize capital gains.

It may be difficult to switch tracking methods once you have chosen one - check with your tax advisor.

NotACPA

At Vanguard at least, for covered shares you can decide whether you want them to track individual lots or use the average cost method. When you sell, you tell them which lots to sell and that is what is reported at tax time.

Since Quicken is happy to track all the individual lots, that's what I do. You can still say "various" for the purchase date on Sched D if you have records in case of an audit. That way you can do tax loss harvesting or choose the highest cost lots when selling to minimize capital gains.

It may be difficult to switch tracking methods once you have chosen one - check with your tax advisor.

My recollection is that you're NOT allowed to switch methods.
But checking with the tax advisor is also recommended.

q_lurker

My understandings:

Covered / Uncovered can apply to both stocks and mutual funds, but I believe the cutoff date was different by a year.
Seems to me that Vanguard considers the holding non-covered if any shares were owned prior to the cutoff. A covered security would be one for which shares were not owned prior to the cutoff. So if you owned one share on 12/31/2011, the entire holding including subsequently acquired shares, is considered non-covered.
Average cost in Quicken is a one-way computation. All shares of the security in the applicable account (I believe). To compute one average cost for uncovered shares (purchased longer ago) and a different average cost for a covered shares (more recently purchased is not possible short of creating two different securities. There are enough other consequences to the duplicate ticker approach that I would not consider that direction.
Once an investor has begun using an average cost approach, I believe the IRS requires them to continue with that approach (consult your tax adviser).
A direction I might pursue: The investor could do a Remove Shares for all non-covered shares (those purchased prior to the cutoff date) followed by one Add Shares putting that quantity of shares back into the portfolio at their proper total cost basis. That single new lot would have the non-covered average cost. While one might be able to carry that forward with the same type of step for the covered shares, I suspect that average cost value varies as each new reinvested dividend gets added into the mix if that is the way Franklin Templeton is working.
I have never chosen to use average cost since Quicken allows me to compute the most tax-advantageous lots for each sale. For any future acquisitions, I suggest you consider that.

unknown

Thanks to several folks for their replies.

Franklin Templeton does not allow investors to choose specific lots to sell, so that won't work. Also FT does consider shares acquired after 2011 to be covered.

As a check, I just looked at my Vanguard account, and find that they definitely do recognize the concept of covered shares acquired through reinvestment after 2011, even for an account which had shares in the fund in 2005. They also say "For shares acquired before January 1, 2012, Vanguard has only average cost information." So I question whether we can specify lots of noncovered shares. Vanguard investors may be facing the same issue here. How are you folks going to maintain Quicken costs in coordination with Vanguard costs?

(In this particular case, this is the first sale of any shares of this mutual fund. As I understand the Code, I am now in the position where I must choose my cost-flow assumption.)

How many of you consider maintaining costs in Quicken which match the online costs to be important?

I think that is going to be difficult-to-impossible unless Quicken allows the user to specify or adjust the cost basis of a sale.

<throwing up hands>

Rocket J Squirrel

Thanks to several folks for their replies.

Franklin Templeton does not allow investors to choose specific lots to sell, so that won't work. Also FT does consider shares acquired after 2011 to be covered.

As a check, I just looked at my Vanguard account, and find that they definitely do recognize the concept of covered shares acquired through reinvestment after 2011, even for an account which had shares in the fund in 2005. They also say "For shares acquired before January 1, 2012, Vanguard has only average cost information." So I question whether we can specify lots of noncovered shares. Vanguard investors may be facing the same issue here. How are you folks going to maintain Quicken costs in coordination with Vanguard costs?

(In this particular case, this is the first sale of any shares of this mutual fund. As I understand the Code, I am now in the position where I must choose my cost-flow assumption.)

How many of you consider maintaining costs in Quicken which match the online costs to be important?

I think that is going to be difficult-to-impossible unless Quicken allows the user to specify or adjust the cost basis of a sale.

<throwing up hands>

I don't trust Quicken with anything tax related. It's a weak spot.

q_lurker

Thanks to several folks for their replies.

Franklin Templeton does not allow investors to choose specific lots to sell, so that won't work. Also FT does consider shares acquired after 2011 to be covered.

As a check, I just looked at my Vanguard account, and find that they definitely do recognize the concept of covered shares acquired through reinvestment after 2011, even for an account which had shares in the fund in 2005. They also say "For shares acquired before January 1, 2012, Vanguard has only average cost information." So I question whether we can specify lots of noncovered shares. Vanguard investors may be facing the same issue here. How are you folks going to maintain Quicken costs in coordination with Vanguard costs?

(In this particular case, this is the first sale of any shares of this mutual fund. As I understand the Code, I am now in the position where I must choose my cost-flow assumption.)

How many of you consider maintaining costs in Quicken which match the online costs to be important?

I think that is going to be difficult-to-impossible unless Quicken allows the user to specify or adjust the cost basis of a sale.

<throwing up hands>

Vanguard is my primary fund family and I solely use lot-specification with them. I find it hard to believe FT will not do lot specification especially for purchases since 2012.

For me, I consider it very important to keep my Quicken cost basis in line with the real world cost basis figures. Every now and then (like every other year), I find the brokerage screwing up - not on MFs, but on securities where there has been some spinoff or merger or the like. Because I am rigorous at the time of entry, I can pick up those errors at tax time.

That said, Vanguard for the non-covered holdings still reports cap gains computed from average cost, and I routinely scan that data and ignore it. For the covered holdings, we have always been in agreement.

unknown

Thanks to several folks for their replies.

Franklin Templeton does not allow investors to choose specific lots to sell, so that won't work. Also FT does consider shares acquired after 2011 to be covered.

As a check, I just looked at my Vanguard account, and find that they definitely do recognize the concept of covered shares acquired through reinvestment after 2011, even for an account which had shares in the fund in 2005. They also say "For shares acquired before January 1, 2012, Vanguard has only average cost information." So I question whether we can specify lots of noncovered shares. Vanguard investors may be facing the same issue here. How are you folks going to maintain Quicken costs in coordination with Vanguard costs?

(In this particular case, this is the first sale of any shares of this mutual fund. As I understand the Code, I am now in the position where I must choose my cost-flow assumption.)

How many of you consider maintaining costs in Quicken which match the online costs to be important?

I think that is going to be difficult-to-impossible unless Quicken allows the user to specify or adjust the cost basis of a sale.

<throwing up hands>

FT's choices for what they call "Standing Lot Relief Order" are given below. Note there is no mention of choosing specific lot.

First In, First Out (FIFO)

Last In, First Out (LIFO)

Lowest In, First Out (LOFO)

Highest In, First Out (HIFO)

Not Specified

Interestingly, my setting was "Not Specified" and their description says that if I do not specify a standing order, they will use FIFO. They did not do so and will receive a call from me asking for an explanation.

This is independent of the problems of needing to be able to adjust Quicken cost for capital transactions.

mshiggins

Thanks to several folks for their replies.

Franklin Templeton does not allow investors to choose specific lots to sell, so that won't work. Also FT does consider shares acquired after 2011 to be covered.

As a check, I just looked at my Vanguard account, and find that they definitely do recognize the concept of covered shares acquired through reinvestment after 2011, even for an account which had shares in the fund in 2005. They also say "For shares acquired before January 1, 2012, Vanguard has only average cost information." So I question whether we can specify lots of noncovered shares. Vanguard investors may be facing the same issue here. How are you folks going to maintain Quicken costs in coordination with Vanguard costs?

(In this particular case, this is the first sale of any shares of this mutual fund. As I understand the Code, I am now in the position where I must choose my cost-flow assumption.)

How many of you consider maintaining costs in Quicken which match the online costs to be important?

I think that is going to be difficult-to-impossible unless Quicken allows the user to specify or adjust the cost basis of a sale.

<throwing up hands>

I'm in agreement with q.lurker. I want my cost basis in Quicken to be accurate, especially in the cases where a merger or spinoff has occurred. I'll spend the time researching and/or calculating via Excel, then experiment to find the best way to enter the transactions in Quicken to capture the basis.

unknown

Thanks again for the reply.

Somewhat to my surprise, I was able to add a new security with the same symbol. There would still be problems, at least because the number of shares in Quicken will not match the online number of shares. I think that would mean entering each transaction manually. It would be quite tedious to do all this hand work for each mutual fund I hold in a taxable account.

I have realized that the approach of just using the Quicken number on my tax return will also not work, when I get to selling covered shares where I pretty much have to report whatever FT reports.

So I still need to be able to tell Quicken what cost to use for a sale. Anyone have any ideas?

I used a similar approach for my securities that had both covered and noncovered holdings. As Quicken does not support 2 average cost calculations (as the brokerage houses correctly compute), I created a security with a pre coverage designation. I then updated all pre coverage transactions changing the security from the actual to the newly created security. This forced Quicken into computing separate average cost calculations.

Going forward, reinvestment purchases will be correctly reflected in the actual security. Pre coverage sales will be downloaded to the actual security and will need to be edited to reflect a sale of the pre coverage created security.

My cost basis in Quicken agrees to my brokerage statement cost basis. Quicken does reflect that security holdings are not correct but it is easily reconcilable as the actual security is short by the same amount of the created pre coverage security.

unknown

Thanks to several folks for their replies.

Franklin Templeton does not allow investors to choose specific lots to sell, so that won't work. Also FT does consider shares acquired after 2011 to be covered.

As a check, I just looked at my Vanguard account, and find that they definitely do recognize the concept of covered shares acquired through reinvestment after 2011, even for an account which had shares in the fund in 2005. They also say "For shares acquired before January 1, 2012, Vanguard has only average cost information." So I question whether we can specify lots of noncovered shares. Vanguard investors may be facing the same issue here. How are you folks going to maintain Quicken costs in coordination with Vanguard costs?

(In this particular case, this is the first sale of any shares of this mutual fund. As I understand the Code, I am now in the position where I must choose my cost-flow assumption.)

How many of you consider maintaining costs in Quicken which match the online costs to be important?

I think that is going to be difficult-to-impossible unless Quicken allows the user to specify or adjust the cost basis of a sale.

<throwing up hands>

As a long time Quicken user, it would be nice if Quicken actually improved their Premier version each year, instead of merely changing the graphic interface. If they're not going to actually improve the new version, at least leave the interface alone.

It would be even better if they figured out a way to actually match covered and non-covered cost bases with the mutual funds reporting. Years ago, they figured out a way to record average cost basis of mutual funds after many years of not being able to do it. I believe they could also figure out a way to record the covered/non-covered shares problem. Otherwise, the usefulness of Quicken to record investment capital gains is further reduced, and I may have to find some other program instead.