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Mutual fund exchange transaction that preserves cost basis

Sean McConnon
Sean McConnon Member
edited November 2018 in Investing (Windows)
Hii,



I have Windows 10 and am using Quicken Deluxe for Windows, 2016.



I'm trying to record the following scenario in my ROTH IRA brokerage account:



I have rebalanced my portfolio. I have exchanged shares of one fund to purchase shares of two other funds. I executed this with my brokerage as an exchange.



I have previously just entered these transactions as sells and buys. I recently noticed that this tactic does not carry cost basis information from the purchase of the first fund. How can I enter this transaction so that the cost basis information is carried into the newly purchased fund?

Comments

  • Sherlock
    Sherlock SuperUser ✭✭✭✭✭
    edited October 2018
    How can I enter this transaction so that the cost basis information is carried into the newly purchased fund?
    I suggest you use Remove and Add  transaction instead of Sell and Buy transactions.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited May 2018
    Cost basis is a defined quantity applicable to a specific set of lots of a specific security.  It is not an account level parameter other than the fact that all the cost basis information for the securities in an account can be added together.  Cost basis is not cash you put into the account.

    What that means is that when you sell one security and buy a different security, your cost basis changes.  That is the way it is supposed to work by design.  Only in very specific security mergers and acquisitions does the cost basis transfer from one to anther security.  Your's is not one of those specific cases.  
    How can I enter this transaction so that the cost basis information is carried into the newly purchased fund?
    Doing the transactions correctly as sells and buys, you can't, because it is not appropriate. 

    If you choose to jury-rig your setups, you can do as Sherlock suggested and use Remove Shares / Add Shares where you specify your desired cost basis value in the Add Shares transactions.  Doing so will lead to misleading information about the performance of the new fund vis-a-vis its real cost basis. 
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited April 2018
    "I recently noticed that this tactic does not carry cost basis
    information from the purchase of the first fund. How can I enter this
    transaction so that the cost basis information is carried into the newly
    purchased fund?
    "
    I wonder why you'd want to do that in the first place.  Your basis in the Roth for taxes is the sum of your contributions and that's easy enough to determine no matter how much activity goes on in the Account.

    The transactions really are sells and buys: you're not going to participate in any price appreciation or depreciation in the securities you've sold and your fate hinges on how well the securities you've purchased perform.  Too, "correct" bases for you securities gives you instant feedback on how they're doing because profit and loss for each security is properly stated.  You really don't have that feedback if you're somehow "rolling over" basis because you can't compare the market value of any security to a legitimate basis figure for that security.  And I wonder how you'll manage dividends and other distributions reinvested in the same stock?  Are you going to have them affect your basis, (i.e., you'll do a "BUY" for those), or not, (i.e., you'll delete the dividend and then do a $0 "ADD")?

    I'm just afraid you'll end up with a fruit salad of bases that's pretty darn meaningless and confusing plus making a lot of extra work for yourself for no real gain that I can see.

    I'd say tote up your contributions, make a note in the Account of the new basis each time you make another contribution, increasing your basis for tax purposes, and run the Account the same you would an after-tax brokerage account.
  • Sean McConnon
    Sean McConnon Member
    edited October 2018
    Thank you to all who replied. I see your point about not preserving cost basis from old securities. I will keep using buy and sell for the transactions!

    I have a related question. Quicken's Portfolio Value vs cost basis chart is what sent me down this path. I was trying to interpret that chart as how much did contribute vs how much are my investments worth. I see now that this is the wrong conclusion to draw from this chart. 

    My question is if such a chart exists or can be made? Again, I'm interested in graphing how much I contributed vs how much my investments are worth.

    Thank You
  • Sherlock
    Sherlock SuperUser ✭✭✭✭✭
    edited April 2018

    Thank you to all who replied. I see your point about not preserving cost basis from old securities. I will keep using buy and sell for the transactions!

    I have a related question. Quicken's Portfolio Value vs cost basis chart is what sent me down this path. I was trying to interpret that chart as how much did contribute vs how much are my investments worth. I see now that this is the wrong conclusion to draw from this chart. 

    My question is if such a chart exists or can be made? Again, I'm interested in graphing how much I contributed vs how much my investments are worth.

    Thank You

    I suggest you consider using an Investment Performance report: select Reports > Investing > Investment Performance
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    edited November 2018
    Sean,

    Unfortunately I don't think Quicken has a built-in chart that will show both your contributions and your account value.  

    If you are mostly interested in the performance of your investments, not artificially affected by the amount of your contributions or withdrawals, the Investment Performance graph would probably be most useful. Customize it to include just the account and date range you are interested in and subtotal by year. If you subtotal by a shorter period, the return percentage will be annualized, which makes it look much more volatile than it really is.

    Or, if you want to see cumulative results of your investments, you can use the Growth of $10,000 view in Investing/Performance. Customize it for the account and date range you want, and make sure to choose All securities or at least all the securities you have held in this account. Note that Qwin 2018 R8.8 still shows the "You must select atleast one account" message unless you include a non-iretirement account in the selection. You can choose one that has zero balance so it will not affect the results.
    QWin Premier subscription
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    edited May 2018

    Thank you to all who replied. I see your point about not preserving cost basis from old securities. I will keep using buy and sell for the transactions!

    I have a related question. Quicken's Portfolio Value vs cost basis chart is what sent me down this path. I was trying to interpret that chart as how much did contribute vs how much are my investments worth. I see now that this is the wrong conclusion to draw from this chart. 

    My question is if such a chart exists or can be made? Again, I'm interested in graphing how much I contributed vs how much my investments are worth.

    Thank You

    Such a chart or report does not exist leading to probably creating two reports and combining the info in Excel or similar.  

    For the contributions report, I would be looking at a customized Investing Transactions or Banking Transactions report.  I would set Accounts for the IRA, 401k, etc. accounts as applicable.  I would set the categories as any and all account from which the contributions might have come.  You may need to do some tweaking based on your specific style of use.

    The Portfolio Value and Cost Basis report is good for a time-varying presentation of account balance.    
  • Sean McConnon
    Sean McConnon Member
    edited October 2018
    I don't see the growth of 10,000 view. Is that available in Quicken deluxe 2016?
  • Sean McConnon
    Sean McConnon Member
    edited May 2018

    Thank you to all who replied. I see your point about not preserving cost basis from old securities. I will keep using buy and sell for the transactions!

    I have a related question. Quicken's Portfolio Value vs cost basis chart is what sent me down this path. I was trying to interpret that chart as how much did contribute vs how much are my investments worth. I see now that this is the wrong conclusion to draw from this chart. 

    My question is if such a chart exists or can be made? Again, I'm interested in graphing how much I contributed vs how much my investments are worth.

    Thank You

    Thank You, I created the contribution report.

    Do you have thoughts on how to generate a similar security or account balance report?
  • Sherlock
    Sherlock SuperUser ✭✭✭✭✭
    edited May 2018

    I don't see the growth of 10,000 view. Is that available in Quicken deluxe 2016?

    The Growth of $10,000 is not available in Quicken 2016 Deluxe:

    image
This discussion has been closed.