Traditional IRA Conversion to Roth IRA > Cost Basis

Greg Jones

This is the first year I have performed the above transaction. As I understand, the process in Quicken is to "Remove Shares" from the Traditional IRA account and to "Add Shares" to the Roth IRA account. The conversion is within the same investment (a Vanguard mutual fund) and did not involve a sell/buy transaction. After completing the transaction I noticed that the "Gain/Loss (%)" column in the Investing Summary page shows a lower gain than prior to the conversion. I expected the cost basis to remain the same. Does Quicken change the cost basis of the original investments to the conversion date? If so, is there a way to avoid this cost basis change?

John_in_NC

When you Remove Shares from a MF, the cost basis is reduced by the amount of the shares removed. (Which shares get remove depends on FIFO, LIFO, or if you explicitly specify the lots.) My guess would be FIFO (default setting).

When you Add Shares, you have the option to set the cost without messing with the Cash Balance.

I can't see your data (or if you are moving these funds between accounts), but I reckon your problem is that you don't have a cost associated with the Add Shares transaction.

John_in_NC

Thanks for the update.

Your Add Shares transaction (unless you manually specify the cost) will have a cost of $0 and will throw things off. You can double check by opening up that transaction to see what the cost is.

You mentioned Single Mutual Fund. What you might be wishing to do (and certainly only attempt after making backups) is to change the Remove Shares transaction to a Transfer Shares transaction. Then, specify the same amount of shares (write it down before you start editing!) and the destination Roth Account. This Transfer Shares transaction will move all the underlying lots along with their associated costs to the new account.

When you go into your Roth account after entering, you will see all the add shares transactions with the correct cost basis assigned for each lot.

Here is a quick example:

John_in_NC

When you Remove Shares from a MF, the cost basis is reduced by the amount of the shares removed. (Which shares get remove depends on FIFO, LIFO, or if you explicitly specify the lots.) My guess would be FIFO (default setting).

When you Add Shares, you have the option to set the cost without messing with the Cash Balance.

I can't see your data (or if you are moving these funds between accounts), but I reckon your problem is that you don't have a cost associated with the Add Shares transaction.

Greg Jones

Hi John, Sorry for my delayed response. The financial transaction was a single mutual fund, all shares. The financial institution treated it as a shares move keeping the cost basis of all historical share purchases intact.

In Quicken the transaction involved a single Remove Shares and Add Shares transaction between two Quicken accounts. Unlike the financial institution Quicken assigned a dollar amount to these transactions, presumably the share price on the date of the transaction.

So the financial institution retained the original cost basis for each historical transaction but Quicken established a one new one. Am I correct that Quicken does not offer a transaction type that will retain all of the original cost basis amounts? If so, is this a reasonable enhancement request?

John_in_NC

Thanks for the update.

Your Add Shares transaction (unless you manually specify the cost) will have a cost of $0 and will throw things off. You can double check by opening up that transaction to see what the cost is.

You mentioned Single Mutual Fund. What you might be wishing to do (and certainly only attempt after making backups) is to change the Remove Shares transaction to a Transfer Shares transaction. Then, specify the same amount of shares (write it down before you start editing!) and the destination Roth Account. This Transfer Shares transaction will move all the underlying lots along with their associated costs to the new account.

When you go into your Roth account after entering, you will see all the add shares transactions with the correct cost basis assigned for each lot.

Here is a quick example:

Greg Jones

John,

Worked Great! Thank you.