Am unable to enter a Return of Capital transaction for a security in my TFSA account

Dennis Varcoe

I received notification from my financial advisor of an adjustment to the cost basis for a security held in my TFSA account (Quicken Home & Business 2019 Canadian Version.) However, the system will not let me enter the transaction without affecting the cash balance as the Transfer Account field is greyed out. I know the cost basis is not a critical element for a TFSA account but I like to keep my records complete and accurate and in agreement with my financial institution. Is there a solution?

Tom Young

"Unfortunately, none of the individual dividends I received are equal to or greater than the adjustment amount, therefore I can't apply it to any one dividend payment."

I've received Returns of Capital in the past and those are reported on 1099-DIVs in the US, typically received sometime in February.  I see no need to attribute the Return of Capital to any particular dividend payment, so I make a 12/31/XX entry recording the Return of Capital and a 12/31/XX entry recording a "negative" dividend.  That results in total dividends for the year correctly stated with no cash effect.

Tom Young

Well, a Return of Capital transaction does involve cash; at least it does in the US and I assume in Canada too.  If this is an "after the fact" return of capital, i.e., the cash was originally received as something else, like a dividend, then there would be no cash effect from the "notification."  It would be accounted for as a reduction of a previously reported dividend (a cash reduction) followed by the return of capital transaction (a cash increase), with no net cash effect in the Account. 

Dennis Varcoe

Thanks Tom. I agree with your comment that the return of capital adjustment notification doesn't result in a change to the cash position. I believe the adjustment relates to previous dividends received, probably an accumulation for all of 2019. Unfortunately, none of the individual dividends I received are equal to or greater than the adjustment amount, therefore I can't apply it to any one dividend payment. What I don't understand is that I can make such adjustment entries in an RRSP or RRIF account (IRA or 401K in the US) but not in a TFSA (Tax Free Savings Account). Why the difference?

Tom Young

"Unfortunately, none of the individual dividends I received are equal to or greater than the adjustment amount, therefore I can't apply it to any one dividend payment."

I've received Returns of Capital in the past and those are reported on 1099-DIVs in the US, typically received sometime in February.  I see no need to attribute the Return of Capital to any particular dividend payment, so I make a 12/31/XX entry recording the Return of Capital and a 12/31/XX entry recording a "negative" dividend.  That results in total dividends for the year correctly stated with no cash effect.

Dennis Varcoe

Thanks for your suggestion Tom. I followed the steps you outlined and they worked perfectly. I still don't know why a TFSA (Tax-Free Savings Account in Canada) is handled by Quicken differently from an RRSP (Registered Retirement Savings Plan) or RRIF (Registered Retirement Income Fund).