Reinvested distribution: Div, CG, ROC. Where do the shares go?

I "upgraded" to Quicken for Windows 2019 ... yesterday. I'm running Windows 10. No complaints about the new version. This question would have applied to the Quicken 2016 I have been using.

I have a "managed payout fund" with Vanguard. I just downloaded its IRS Form 1099-R for 2018, and I'm updating the fund's data in Quicken (such the amounts allocated in distributions among Dividends, Capital Gains, and Return of Capital) based on the info in that form. (I'll note that the 1099-R puts ROC distributions in Box 3, that is, "nondividend distributions.")

I'm struggling to figure out how to document the fund's end-of-year distribution. Unlike the monthly ones, which are straight cash payouts, the end-of-year distribution is reinvested back into the fund. One element of this "reinvested distribution" is that shares get added to my holdings in the fund.

In an ordinary "reinvested income" transaction of course, each income category gets its share of (1) shares and (2) the dollar amount of the income. In this transaction, though, the Form 1099-R ascribes about 40% of the dollar value of the distribution to Return of Capital. Wait -- what? Since when did Return of Capital change your share holdings -- in either direction??

A: For purposes of ascribing shares to income category, should I ignore the ROC and distribute the shares only between Div & CG? I'll note that the cash value of the Div & CG income (as reported on the 1099-R) is far lower than the cash value of the whole distribution (about 60% of the total).

If I should include the ROC in the distribution of the shares ... where do I enter its share of those fund-shares? The ROC transaction form has no field for shares. The Reinv transaction form has no field for ROC.

I'm not sure that the Reinv transaction form's "Misc" field would adjust Cost Basis the way a ROC transaction does. Or would the change in the number of shares have the same effect on Cost Basis that an ROC transaction would have?

B: If I do need to enter the value that the 1099-R ascribes to ROC in that reinvested distribution, how should I enter it? What should the ROC portion of this reinvested distribution do to the account's Cost Basis?

Is adding the number of shares going to offset the drop in share price (which I believe does the "heavy lifting" of reducing the account's Cost Basis)?

Should I try to enter a negative number? Is that even possible?

Thanks for looking this over.


  • Sherlock
    Sherlock SuperUser ✭✭✭✭✭
    edited February 2019
    The ROC is a non-taxable event that reduces the original cost-basis.  Essentially, you should be reducing the original share cost appropriately and be using the difference to purchase additional shares.  I suggest using RtrnCap and Bought action transactions to reflect the adjusted cost-basis and the purchase of the additional shares.  The transaction details should be provided on an investing activity statement provided by the financial institution.

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    I am not personally familiar with managed payout funds, so I am taking your information at face value.  I take that as all the monthly transactions were 'regular' dividend or cap-gain distributions, distributed as 'cash' to you directly and the 1099 properly accumulated those.  

    For the December transaction, there were three components - a dividend (say $5), a cap gain (say $1) and something they tagged as a ROC or a non-dividend distribution (say $4 = 40%).  That total amount or all three components were reinvested rather than distributed as cash. 

    I agree with Sherlock.  You can use the Reinvest actions for the dividend and cap gains.  For the ROC component, I would use a RtrnCap transaction followed by a Buy Shares transaction.  I would give consideration to lumping all three 'incomes' into one Buy Shares (not using any Reinvest transaction) if that might make more sense.  
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    The Vanguard managed payout fund generates a fixed payment each month, which is adjusted annually based on the fund's performance over the past several years. The idea is to generate a steady stream of cash without depleting the fund, like an endowment. These monthly payments are made around the middle of each month and are a fixed combination of income, realized gains, and ROC.

    The distribution schedule is shown here

    At the end of the year, the fund makes an additional distribution of any remaining income, gains, and ROC it has accumulated, which is the one @Dana Netherton is reinvesting.

    I suppose to be absolutely accurate from a tax viewpoint, you should be recording all the components of each distribution.

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