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return of capital/cost basis adjustment (3 Legacy Votes)

QUICKFIXPLZQUICKFIXPLZ Member
edited March 15 in Investments (Windows)
As noted by others, Quicken allocates return of capital using the relative COST BASES of the available lots.  Is this an acceptable alternative for IRS tax reporting purposes to the way ETrade allocates return of capital using the relative number of SHARES of the available lots?  In any case, I recommend that Quicken update its program to allow the user the choice between these two methods.

I also recommend that Quicken provide a means for "time-stamping" return of capital transactions so that only lots that are bought/sold prior to the ex-dividend date (or other date triggering the return of capital transaction) can be identified and appropriately included/excluded from the return of capital allocation to outstanding lots.
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  • mshigginsmshiggins SuperUser ✭✭✭✭✭
    edited March 2018
    Can you explain a bit about how the ex-dividend date relates to a return of capital?
    Quicken user since Q1999. Currently using QW2017.
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  • QUICKFIXPLZQUICKFIXPLZ Member
    edited January 2019
    "Date-stamping" would be a better term, and an example might help.  Suppose on 9/8/17, Company XYZ had declared a $1 per share dividend payable on 10/3/17.  XYZ had also announced that shareholders of record on the company's books on or before 9/18/17 would be entitled to the dividend.  The ex-dividend was set one business day before the record date -- in this case on 9/15/17.  100 shares of XYZ were purchased on 9/14/17, and an additional 100 shares were purchased on 9/20/17 at the same price.  The 100 shares of XYZ purchased on 9/14/17 were sold on 12/29/17.  These transactions as well as the $100 dividend payment (for 9/14/17 lot only) on 10/3/17 were recorded in Quicken with their corresponding transaction dates.

    At the end of the year XYZ reclassified 50% of the 10/3/17 dividend as return of capital (ROC), and the Quicken dividend transaction was adjusted accordingly.  Because both purchase transactions occurred prior to 10/3/17, Quicken erroneously allocated half of the ROC of $50 to BOTH the 9/14/17 and 9/20/17 lots instead of allocating the full $50 to the 9/14/17 lot.  Therefore, the Quicken sale transaction on 12/29/17 will underestimate the gain (or overestimate the loss) on the 9/14/17 lot and overestimate the eventual gain (or underestimate the eventual loss) on the 9/20/17 lot by $25.

    This problem could be avoided if Quicken had a way of assigning the ex-dividend date to the ROC transaction and using it as a means to exclude the 9/20/17 lot from the ROC allocation associated with the 10/3/17 dividend payment.
  • markus1957markus1957 SuperUser ✭✭✭✭✭
    edited March 2018

    "Date-stamping" would be a better term, and an example might help.  Suppose on 9/8/17, Company XYZ had declared a $1 per share dividend payable on 10/3/17.  XYZ had also announced that shareholders of record on the company's books on or before 9/18/17 would be entitled to the dividend.  The ex-dividend was set one business day before the record date -- in this case on 9/15/17.  100 shares of XYZ were purchased on 9/14/17, and an additional 100 shares were purchased on 9/20/17 at the same price.  The 100 shares of XYZ purchased on 9/14/17 were sold on 12/29/17.  These transactions as well as the $100 dividend payment (for 9/14/17 lot only) on 10/3/17 were recorded in Quicken with their corresponding transaction dates.

    At the end of the year XYZ reclassified 50% of the 10/3/17 dividend as return of capital (ROC), and the Quicken dividend transaction was adjusted accordingly.  Because both purchase transactions occurred prior to 10/3/17, Quicken erroneously allocated half of the ROC of $50 to BOTH the 9/14/17 and 9/20/17 lots instead of allocating the full $50 to the 9/14/17 lot.  Therefore, the Quicken sale transaction on 12/29/17 will underestimate the gain (or overestimate the loss) on the 9/14/17 lot and overestimate the eventual gain (or underestimate the eventual loss) on the 9/20/17 lot by $25.

    This problem could be avoided if Quicken had a way of assigning the ex-dividend date to the ROC transaction and using it as a means to exclude the 9/20/17 lot from the ROC allocation associated with the 10/3/17 dividend payment.

    If you carefully choose the entry date for the ROC transaction, you can most often avoid unintended lot allocation. In your example, if after modifying the 9/14 lot dividend transaction paid 10/3, you then enter the ROC transaction with a date of 9/15, I believe the intended cost basis per lot would be preserved. Your daily cash balance would not though.

    To preserve the proper daily cash balance in the account, you can leave the original 9/14 lot dividend alone (or split it as a dividend and miscellaneous deposit for tax reporting) and record  the cash from the 9/15 ROC entry as a transfer back into the same account so it does not show up in the cash balance.

    That said, Quicken could accommodate your idea into the lot cost basis table similar to the way they handle a Sell transaction by assigning the ROC to a specific lot(s). Then ROC would not perturb the daily cash balance or require the work around from the previous paragraph.
  • ChicagoGuyChicagoGuy Member ✭✭
    Tracking Cost Basis can be complicated to begin with. So errors in Quicken cost basis basis reports can creep in. Plus Quicken doesn't provide for all methods currently allowed (e.g. switching a Mutual Fund cost basis from Avg Cost to Spec ID where Spec ID is only applied moving forward. Quicken only allows all of one way or the other for an asset). Plus Q provides the same cost basis by asset and not by "asset in an account".

    Getting Cost Basis Reports are misleading if not downright useless when it can Quicken reports cost basis that's significantly diferent from the true cost basis reported by mybrokerage account. That then makes it useless for tax planning

    Allow "Adjustment to Cost Basis" optionally allowing the user do to it on a per asset or simply for an entire account. The latter is for those who simply want the bottom line cost basis for tax planning. This would allow me to get accurate values on my cost basis reports
  • Quicken_TykaQuicken_Tyka Moderator mod
    edited March 15

    Hello @ChicagoGuy

    Thank you for taking the time to visit the Community to post your Idea, although I apologize that this feature isn't currently offered.

    I have moved your post to the ongoing Idea thread to add the ability to adjust the Cost Basis for reporting.

    Be sure to navigate to the top of this post and click the up arrow to add your vote!


    Ideas are reviewed by our development team to see what people would like to be available in the future.

    Thank you,

    -Quicken Tyka

    -Quicken Tyka
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