Mutual Fund Conversions - Basis Understatement

I converted Vanguard Admiral fund shares into the corresponding Vanguard ETF shares. Prior to the conversion I owned both the Admiral and ETF share classes. When I do the mutual fund conversion in Quicken 2017 my merged investment basis is dramatically understated. Can anyone help me?  

Comments

  • NotACPA
    NotACPA SuperUser ✭✭✭✭✭
    In tax law, there's no such thing as a "conversion".  You sold the Vanguard Admiral shares and bought the ETF shares.  Record it as such.

    Q user since February, 1990. DOS Version 4
    Now running Quicken Windows Subscription, Business & Personal
    Retired "Certified Information Systems Auditor" & Bank Audit VP

  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    @NotACPA,
    It appears you are mistaken about converting a Vanguard mutual fund to the corresponding ETF. The fund to ETF conversion is generally not taxable. See item 5 in this FAQ:
    https://investor.vanguard.com/etf/faqs
    So the Mutual fund conversion transaction would be the appropriate way to enter this in Quicken, and the ETF shares should retain the original cost basis and holding period.

    We need more details from the OP about the nature of the problems he is seeing. This may be related to the problems with mutual fund conversions that have recently been fixed in QWin 2019.

    @scott.hauserr, did you use a Mutual Fund Conversion transaction to do this conversion? This should have resulted in one Removed transaction for the mutual fund shares and one Added transaction for each tax lot of the ETF shares.

    In earlier versions of Quicken, the Removed transaction was calculated incorrectly and this may be the source of the problems you are seeing. Please elaborate on what you are seeing.
    QWin Premier subscription
  • scott.hauserr
    scott.hauserr Member ✭✭
    Jim - I use Quicken Home and Business 2017. As you say it did do one entry to remove all shares of my old Vanguard holding and then converted all of my individual investments transactions of the old position into the new ETF. That worked fine but the resulting basis of the new ETF is about 25% of what it was on the old investment position. What I am struggling with is for the basis to entirely come over to the new position. Do you have any additional guidance on how to do this correctly?   
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    It is probably best to delete and re-enter the conversion.

    First, back up your data file.

    Then:
    • delete the Removed and all the Added transactions.
    • Go to the price history for the fund that was removed and enter the correct value for the conversion date.
    • Re-enter the Conversion transaction, making sure you enter the correct share price for the ETF on the conversion date (from your statement) and the total number of shares you received
    • Click on the Removed transaction to select it, there will be a number below "Removed" in the Action column. This should be the market value of the old position on the conversion date (shares converted * price per share), not some ridiculously large number. If it is wrong, you can type in the correct amount. You should also go to the Price History for the mutual fund and make sure it is still correct on the conversion date.
    Hopefully this process will result in a correct conversion. I am curious whether you have to make any changes in the last step. This is what was fixed in QWin 2019 not long ago.
    QWin Premier subscription
  • scott.hauserr
    scott.hauserr Member ✭✭
    I actually converted three different positions. Two of my positions I had both Admiral shares and ETF shares prior to conversion. When I used Mutual Fund Conversion in Quicken on these two conversions the basis merged perfectly. The third position was an Admiral share holding only and when I do the Mutual Fund Conversion in Quicken to the comparable ETF I loose about 48% of my basis. Very strange....any ideas?
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    I actually converted three different positions. Two of my positions I had both Admiral shares and ETF shares prior to conversion. When I used Mutual Fund Conversion in Quicken on these two conversions the basis merged perfectly. The third position was an Admiral share holding only and when I do the Mutual Fund Conversion in Quicken to the comparable ETF I loose about 48% of my basis. Very strange....any ideas?
    @scott.hauserr  I would carefully double-check the per lot cost basis information before the conversion for the third position to make sure there was nothing funky involved.  

    You have the option of editing each of the Add Share transactions for that set to manually synch the before (MF) cost basis to the after (ETF) cost basis for each lot.  I realize reinvestments might be involved making that a bit manually intensive, but it is also just changing one number in each transaction.  You might also spot what is getting messed up along the way.
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