Gain/Loss on Dividend Payments in IRA Accounts

Question

Quicken seems to calculate the G/(L) on dividends paid to an IRA account at the price on the day the dividend is reinvested.  However, I believe the cost basis should be 0, since these are non-taxable accounts and upon withdrawal,  it is treated as ordinary income.  I have tried to manually edit the transaction and I cannot make the cost basis 0 for any dividend reinvestment.
Is there a work around for this?  I completely understand the process is correct for taxable, non-IRA accounts.  I have double and triple checked that I have the account properly set up as a non-taxable IRA account in Quicken - I've been a user since Quicken DOS, so I've been around the block a few times with this stuff :)

Mary T · Answer

Thank you all.  I guess I was looking at this wrong.  I was seeing a big loss in one account that also paid out a big capital gains last year, and honestly, it bothered me since the funds were all, well, at no cost to me.  But I was in error :)   I could have taken the distribution as cash.

q_lurker · Answer

Mary T said:

Your belief is in error.  Gain/Loss is computed independent of the type of investment account holding the asset (retirement or non-retirement).  Gain/Loss is a defined numeric.  While I would argue this is across the board among financial professionals, clearly Fidelity proves me wrong on that account with their inconsistency.

Reinvestment of dividends is a choice the investor makes to buy additional shares of the fund (or other security via DRP plans).  In that regard, it is no different that if you took the dividend in cash and immediately directed the purchase of additional shares.  Whether in a retirement account or a non-retirement account, that sets up Gain/Loss based on the price you at which you bought those shares.  That price is never $0.  The fact that such a Gain/Loss when realized is or is not taxable is immaterial to whether the Gain/Loss exists.

Gain/Loss in Quicken is always calculated on a security basis with the totals rolled up into an account total for currently held securities.  There is not a separate calculation of Gain/Loss based on dollar amounts contributed into or taken from the account.

No, there is not a (realistic) workaround to bypass Quicken's defined process.  (That is not to say some desperate users have not concocted what I might call unrealistic approaches.)

You have not established anything 'wrong' with the current process.  What is driving this question?

Jim_Harman · Answer

If performance tracking is important to you, the correct way to enter Reinvest transactions is to use the price on the day of the reinvestment, or more precisely to record the total amount of the dividend and the number of shares purchased, and let Quicken compute the price per share.

If your FI is downloading something different, you will need to edit the transactions and/or get them to fix their downloads.

If "Tax deferred" is selected for the account, it will be excluded from tax reports.