Capital Gains report does not account for return of capital when calculating cost basis

Unknown
Unknown Member
edited October 2018 in Investing (Windows)

When I enter corporate stock spinoffs into Quicken, they get recorded as a purchase of the new stock back-dated to the purchase date of the original stock, plus a return-of-capital for the original stock, equal in value to the cost basis of the new stock.  Awkward, but workable and understandable.

The problem is that when I run a report on capital gains at tax time, the return-of-capital transaction is not used in calculating the current cost basis of the original stock.  The original (real) purchase price of the stock is used as the cost basis, which results in an incorrect value for the capital gains, which is an error that I have to chase down and correct.

This exact problem was reported 2 years ago, but it is still present in Quicken Premier 2016 R14.12.
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Comments

  • Unknown
    Unknown Member
    edited February 2018
    You're exactly right. In Quicken Premier 2013, that incorrect capital gains report cost me to overestimate how much of a loss I actually had, and not sell off more of a fund (at a loss) than I should have. Quicken should address this problem already.
  • Sherlock
    Sherlock SuperUser ✭✭✭✭✭
    edited October 2018
    This issue has been discussed previously.  What many of us do is enter the Corporate Securities Spinoff, redate the new transactions, and change the RtrnCap to RtrnCapX and the Buy Shares to Add Shares.  Using the Corporate Securities Spinoff gets the ratios applied properly, changing the dates corrects the history, and the last two changes corrects the cash and sets up the long-term and short-term capital gain calculation properly for a future sale.
  • Unknown
    Unknown Member
    edited October 2018
    I am ever hopeful that Quicken will fix their bugs and we won't have to rely on tedious work-arounds. I posted in the "ideas" forum because that appears to be the recommended method of requesting improvements and reporting problems.
  • Sherlock
    Sherlock SuperUser ✭✭✭✭✭
    edited February 2018

    I am ever hopeful that Quicken will fix their bugs and we won't have to rely on tedious work-arounds. I posted in the "ideas" forum because that appears to be the recommended method of requesting improvements and reporting problems.

    I think bugs should be posted as Problems not Ideas. 
  • Unknown
    Unknown Member
    edited February 2018

    I am ever hopeful that Quicken will fix their bugs and we won't have to rely on tedious work-arounds. I posted in the "ideas" forum because that appears to be the recommended method of requesting improvements and reporting problems.

    It will be a great day when Quicken finally makes it clear how to submit a bug report.
  • Sherlock
    Sherlock SuperUser ✭✭✭✭✭
    edited February 2018

    I am ever hopeful that Quicken will fix their bugs and we won't have to rely on tedious work-arounds. I posted in the "ideas" forum because that appears to be the recommended method of requesting improvements and reporting problems.

    I suspect they're maintaining there own internal bug tracking system.  Problems (or ideas) with work arounds are likely lower priority than problems (or ideas) without work arounds.
  • Unknown
    Unknown Member
    edited February 2018
    Sherlock said:

    This issue has been discussed previously.  What many of us do is enter the Corporate Securities Spinoff, redate the new transactions, and change the RtrnCap to RtrnCapX and the Buy Shares to Add Shares.  Using the Corporate Securities Spinoff gets the ratios applied properly, changing the dates corrects the history, and the last two changes corrects the cash and sets up the long-term and short-term capital gain calculation properly for a future sale.

    This was not a corporate spinoff, but a simple return of capital -- part of a dividend paid.
  • Unknown
    Unknown Member
    edited February 2018
    This problem has occurred at least since 2013 Premier. It would be nice if Quicken fixed it already.
  • Unknown
    Unknown Member
    edited February 2018
    Sherlock said:

    This issue has been discussed previously.  What many of us do is enter the Corporate Securities Spinoff, redate the new transactions, and change the RtrnCap to RtrnCapX and the Buy Shares to Add Shares.  Using the Corporate Securities Spinoff gets the ratios applied properly, changing the dates corrects the history, and the last two changes corrects the cash and sets up the long-term and short-term capital gain calculation properly for a future sale.

    When calculating cost basis for the capital gains report, Quicken does not include any return of capital transaction, whether it resulted from a return of capital (or principal) distribution, or was created by Quicken as part of how Quicken enters corporate spinoff transactions.


    I have both types.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited October 2018
    It is highly relevant which edition of Quicken you are using since the Return of Capital behavior has varied through the years.  It may also be relevant whether the RtrnCap was entered directly or was created as part of the older approach for Corporate Spinoffs.  

    For my current QW2017 R15.13, new RtrnCap transactions get treated correctly -- cost basis for each lot is reduced by a proportional per-share amount.  That is, the entire return of capital amount is used to reduce cost basis of each share owned as of the date for the RtrnCap transaction.  That is as presented in Holding and Portfolio views.  When the user chooses to identify shares sold, that presentation is consistent with those views.  

    Unfortunately, I am seeing the wrong information presented in the Capital Gains Report.  That report 
    is allocating the RtrnCap dollars to lots available at the time of the RtrnCap transaction in proportion to the original cost basis of the lot, not in proportion to the number of shares. 

    Again, these comments are based on QW2017 R15.13.  Behavior in other versions my vary.  
  • Sherlock
    Sherlock SuperUser ✭✭✭✭✭
    edited February 2018
    Sherlock said:

    This issue has been discussed previously.  What many of us do is enter the Corporate Securities Spinoff, redate the new transactions, and change the RtrnCap to RtrnCapX and the Buy Shares to Add Shares.  Using the Corporate Securities Spinoff gets the ratios applied properly, changing the dates corrects the history, and the last two changes corrects the cash and sets up the long-term and short-term capital gain calculation properly for a future sale.

    LAWRENCE LEVINE:
    This was not a corporate spinoff, but a simple return of capital -- part of a dividend paid.
    Your issue may not be a corporate spinoff but I was responding to John Stimson's query not your response.

    John Stimson:  
    When calculating cost basis for the capital gains report, Quicken does not include any return of capital transaction, whether it resulted from a return of capital (or principal) distribution, or was created by Quicken as part of how Quicken enters corporate spinoff transactions.
    I have both types.
    The Capital Gains report doesn't include return of capital transactions because return of capital transactions are not capital gains (or losses).  A return of capital should reduce the cost basis of the shares held on the date of the return of capital transaction.  When the shares are subsequently sold, the Capital Gains report should reflect the reduction in cost basis in the reported gain (or loss).
  • Sherlock
    Sherlock SuperUser ✭✭✭✭✭
    edited February 2018
    q.lurker said:

    It is highly relevant which edition of Quicken you are using since the Return of Capital behavior has varied through the years.  It may also be relevant whether the RtrnCap was entered directly or was created as part of the older approach for Corporate Spinoffs.  

    For my current QW2017 R15.13, new RtrnCap transactions get treated correctly -- cost basis for each lot is reduced by a proportional per-share amount.  That is, the entire return of capital amount is used to reduce cost basis of each share owned as of the date for the RtrnCap transaction.  That is as presented in Holding and Portfolio views.  When the user chooses to identify shares sold, that presentation is consistent with those views.  

    Unfortunately, I am seeing the wrong information presented in the Capital Gains Report.  That report 
    is allocating the RtrnCap dollars to lots available at the time of the RtrnCap transaction in proportion to the original cost basis of the lot, not in proportion to the number of shares. 

    Again, these comments are based on QW2017 R15.13.  Behavior in other versions my vary.  

    With QW2016 R14.12, new RtrnCap transactions do appear to be treated consistent with IRS rules for when you cannot definitely identify the shares subject
    to the nondividend distribution
     -- cost basis appears to be reduced in a FIFO order when examining the lots on the Holding and Portfolio views. When specifying the shares sold by lot, the original cost basis is presented but with the appropriate gain/loss (based on FIFO).

    However, the Capital Gains report is distributing the cost basis reduction across multiple lots in what appears to be an approximation of the proportion of the original cost basis (apparently the same as you see in QW2017 R15.13) - not FIFO and not proportional by share.

    A work around would be to use a Remove Shares transaction and an Add Shares transaction for each lot to replace the RtrnCap transaction.
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