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Why would a capital gains report be wrong?

Quicken 2020. Build 27.1.25.18 (don't really remember when I started using Quicken)

My 1099 and my account statement show 2042.425 shares sold on 7/26/19.
My Quicken file agrees that 2042.425 shares were sold (closing out the account).

However, a problem shows up when I run Reports > Tax > Capital Gains > Last Year > Subtotal by Quarter
Settings > limit to a single account

In that report, the gross price is about half of what it should be (what shows up on the 1099s, the statement and the Quicken entry for the date).

If I export the report to Excel and total up the number of shares, that number, too, is about half of what it should be.

If I export the account's transactions to Excel (going back to 1984), and calculate the # of shares (bought, reinvested, and sold) over the time we've held it, that comes out correct.

My only hypothesis is that at some time in the past, some shares that should have been marked as "sold" were somehow mismarked (or there's a corruption in the file somewhere).

Some good news is that there's fewer than two dozen taxable transactions since 1984 -- but I wouldn't relish going back through all those tax returns to find where the error started.

The other good news is that this is a short-term bond fund whose share price hasn't varied much over the years. I can plan to estimate the cost basis of the "missing" shares (or just assume that they are the newest ones that weren't already included in this year's 1099.

Even more good news is that closing this account was part of simplifying our finances so we no longer have any accounts where we'll have to depend on Quicken to figure out the capital gains.

So I have reasonable way to estimate the basis on the missing shares, but I thought I'd report it in case there's an underlying problem that could be fixed.

Comments

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    I think my first step would be to run a Cap Gains report for all time for that security only.  (I take it this was not the first sale.)  That should summarized reported or computed cap gains for each sale.  Anything suspect in that report?  You might look at that both as a short term / long term breakdown and as a breakdown by Year or Quarter or similar.  That should also give you something to cross check with the Excel summary you created.   

    I think my second step would be backup your file, have Quicken copy the file (File / File Operations / Copy) and then validate the copy including rebuilding investment lots.  

    Hopefully one of those steps would kick something loose.  

    Third step would be to review Portfolio View information on Cap Gains varying the As of Date to see if anything odd occurs for Cap Gains reported there around the time of other sales or purchases.  
  • NotACPA
    NotACPA SuperUser, Windows Beta Beta
    If there is a prior sale (or, sales) did you select the EXACT same shares for sale at that time as your brokerage chose?  In most cases, they'd chose FIFO.
    If you chose something different than the brokerage chose, AT ANY TIME, then the Cap Gains reports between Q and the brokerage would almost surely differ.
    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • @q_lurker. Thanks. You're right. The first few years look kind of weird. I probably entered those after installing Quicken in the early 90s and may have fumble fingered some of the options. So I've been "believing" what Quicken tells me for about 30 years, and it's probably been off all along.

    @NotACPA. This is the first time that we've sold shares where the brokerage computed the basis.

    Thanks.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Adding on -- There are a couple of other aspects in play here.  Up until 2011 or 2012 (can't recall which off the top), the financial institution (FI) did not provide the basis and gain info to the IRS; only the gross proceeds from the sales were reported to the IRS.  After that date, the FIs began reporting basis and proceeds, but only the basis for shares acquired after that date.  

    That pattern still exists -- if the shares sold were bought before that date, FI only tells IRS sale proceeds.  If the sold shares had been acquired after that date, FI reports both basis and proceeds (thus gain/loss, ST or LT).

    Before that date, the FI might have told you an average cost of the shares sold, or they might have told you based on First In, First Out (FIFO).  For the more recently acquired and now sold shares, the FI is likely telling you what you told them to do - that could be any of several options. 

    Now to the Quicken side -- the program's default selection is to use FIFO, but there are a variety of other ways the user can manage the selection including an average cost option. 

    So your real question is:  What have you told the IRS over the years (your 1040 cap gains reporting) and how does that compare to what you told Quicken (by selection or by default) and how does that compare to what the FI told you (and what you told them).

    Your second question is (after acknowledging that Quicken data and the FI data are inconsistent):  How big a deal is this?  Being a nameless, faceless, nobody on the internet with no credentials, I'll suggest -- not much.  Most likely, you have been using some info from the FI over the years and as long as you continue to do so, and have some paper from them for support, I can't imagine the IRS getting into a tizzy over some discrepancy.  As you noted, you may have had fumble-fingers with Quicken many years ago that aren't worth addressing now.    
  • Exactly.

    Again, the account was opened in 1984. I've got statements from the 80s, some with scribbles showing how I calculated the capital gains -- but I don't have my tax returns back that far.

    All of the shares we sold before 2019 were purchased before 2012, so there were no 1099s calculating the gain. For 2019, the 1099-B does show "basis reported to the IRS" for shares purchased 2012 or later. There are about 1800 shares where the proceeds, but no basis, is reported. The Quicken capital gains report accounts for only 800 of those.

    I got my first PC In 1992 and probably installed my first version of Quicken in the early-mid 90s. (Before then I'd been using AppleWorks on an Apple IIC to calculate the taxes.)

    I'm guessing I made an error early on and so the capital gains I've reported all these years (on about a dozen sales transactions) have been wrong. I could figure out the basis for the 1000 or so shares "missing" from Quicken by
    - using the shares that would have been sold to close the account (e.g. the most recent ones purchased) if I had used the "correct" lots to calculate all the previous annual capital gains figures,
    - using the earliest shares (which may have been ignored when I started using Quicken and depended on it to figure out the basis)
    - a low-ball estimate looking at the history of the share price

    The difference in the three calculations is less than $2000 (again, the share price has been fairly stable). So I'm just going to report the one that's the minimum (so maximizing the capital gains) and be done with it.

    Thanks for listening.
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