Adjust cost base.

When one pays the brokerage to send them a paper certificate for a stock, how does one adjust the cost base to reflect the charge? Thanks.
Tagged:

Best Answer

  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    Answer ✓
    Yes, that worked Frank. I entered 0.001 for the amount of stock purchased and had to multiply the brokerage fee by 1000 to come up with the correct adjustment to the ACB but it seems to work. Just hope I can remember what I've done ten years from now, haha. Thank you very much.

Answers

  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    Hi @jmcgmckinnon,

    You probably looked and found that there isn't a standard transaction type to cover this situation.  So I think the simplest way would be to enter a "Buy transaction" to add the fee to the cost basis.  I would suggest that you post it to the commission category.  And the "Account" would be the account from which you have/will pay the fee.

    Here's what the transaction might look like, where the payment is being made from a checking account:


    Let me know if you have any followup questions.

    Frankx

                            Quicken Home, Business & Rental Property - Windows 10-Home Version

                                             - - - - Quicken User since 1984 - - - 
      -  If you find this reply helpful, please click "Helpful" (below), so others will know! Thank you.  -

  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    Thanks for your reply. I tried doing the buy tx but it would not let me make the buy unless I put in a number of shares for the buy. That would make my share count incorrect. If I just added the fee to the original purchases of the stock, that would adjust the ACB but I have sold some of that stock since and the ACB for those sales would then be incorrect
  • Chris_QPW
    Chris_QPW Member ✭✭✭✭
    If I just added the fee to the original purchases of the stock, that would adjust the ACB but I have sold some of that stock since and the ACB for those sales would then be incorrect
    Why would that make it incorrect?

    It doesn't sound like your certificate fee is any different than any other fee you might be charged to purchase/sell a security.
    Signature:
    This is my website: http://www.quicknperlwiz.com/
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    Was this certificate fee part of the original Buy transaction, like a commission, or was it for an after-the-fact transaction? If part of the original Buy, you could probably include it in the commission for that transaction.

    If after-the fact, you should check with your brokerage or tax advisor to see if it is proper to adjust the cost basis. If not, you can record it in Quicken as a MiscExpense and identify the security. This will have the effect of reducing the performance of the security without affecting the cost basis and thus the capital gain at tax time.
    QWin Premier subscription
  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    Thanks for your reply. I tried doing the buy tx but it would not let me make the buy unless I put in a number of shares for the buy. That would make my share count incorrect. If I just added the fee to the original purchases of the stock, that would adjust the ACB but I have sold some of that stock since and the ACB for those sales would then be incorrect
    jmcgmckinnon,

    Sorry for not being more specific - all you need to do is put a zero in # of shares.

    Frankx

                            Quicken Home, Business & Rental Property - Windows 10-Home Version

                                             - - - - Quicken User since 1984 - - - 
      -  If you find this reply helpful, please click "Helpful" (below), so others will know! Thank you.  -

  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    Thanks for your reply Jim. No, the expense for the share certificate was years after the initial purchase. I tried using the Misc Exp and indicated the security in question. It had no effect on the ACB so my capital gain/loss would not be affected the way I see it. I was hoping using the Misc Exp would increase the ACB to reflect the cost to me but it did not.
  • Frankx
    Frankx SuperUser ✭✭✭✭✭

                            Quicken Home, Business & Rental Property - Windows 10-Home Version

                                             - - - - Quicken User since 1984 - - - 
      -  If you find this reply helpful, please click "Helpful" (below), so others will know! Thank you.  -

  • NotACPA
    NotACPA SuperUser ✭✭✭✭✭
    edited July 2020
    I believe (but I could be wrong) that this expense is NOT, properly, a Capital Expense.
    Thus, it shouldn't adjust your ACB.

    [Edit] Inadvertently edited myself into a double negative.  OOOPPS! [/Edit]

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

  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    Thanks again Frank, but it just will not let me do that without putting in a value other than zero for the number of shares. It defaults to "Recalculate Investment transaction".
  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    Thanks for the reply. Maybe it is not a capital expense (here in Canada) but Quicken does not know what the Misc Exp refers to when I enter it, so am not sure how it decides if it is or not.
  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    No it is definitely part of cost basis - citation:IRC Reg. 1.263(a)-1(e)

    Frankx

                            Quicken Home, Business & Rental Property - Windows 10-Home Version

                                             - - - - Quicken User since 1984 - - - 
      -  If you find this reply helpful, please click "Helpful" (below), so others will know! Thank you.  -

  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    Thanks Frank. Are you referring to Canadian Tax or US? From my point of view is is most definitely part of the ACB.
  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    Ohhhhh your up North??  

    Canadian Tax regs indicate that cost basis includes "brokerage fees" so a fee for delivery of stock certificates would be included in basis.

    Frankx

                            Quicken Home, Business & Rental Property - Windows 10-Home Version

                                             - - - - Quicken User since 1984 - - - 
      -  If you find this reply helpful, please click "Helpful" (below), so others will know! Thank you.  -

  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    Thanks Frank, that is the way I see it just from a common sense point of view (not that means anything to Government). Just got to get Quicken to agree.
  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    Thanks again Frank, but it just will not let me do that without putting in a value other than zero for the number of shares. It defaults to "Recalculate Investment transaction".
    Jim, 

    That must be something in the Canadian version, then. 

    Have you tried putting a very small decimal in instead of zero.  That would allow you to make the entry and should not affect that gain/loss calculation significantly.  In the US version I can enter as little as  0.00000000001 shares

    Frankx

                            Quicken Home, Business & Rental Property - Windows 10-Home Version

                                             - - - - Quicken User since 1984 - - - 
      -  If you find this reply helpful, please click "Helpful" (below), so others will know! Thank you.  -

  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    Answer ✓
    Yes, that worked Frank. I entered 0.001 for the amount of stock purchased and had to multiply the brokerage fee by 1000 to come up with the correct adjustment to the ACB but it seems to work. Just hope I can remember what I've done ten years from now, haha. Thank you very much.
  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    @jmcgmckinnon,

    Glad it worked out...

    BTW - I have trouble remembering what i did last week...   and the lockdown has definately made it worse ("Groundhog Day" syndrome).

    Frankx

                            Quicken Home, Business & Rental Property - Windows 10-Home Version

                                             - - - - Quicken User since 1984 - - - 
      -  If you find this reply helpful, please click "Helpful" (below), so others will know! Thank you.  -

  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    Glad that worked. Another way you could enter this would be to add the fee to the commission in the original Buy
    QWin Premier subscription
  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    Thanks Jim.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    FWIW:  I would have been inclined to enter a Remove Share transaction followed as a same day transaction with Add Shares.  For the Add Shares, included the increased cost basis in that transaction,  If there happened to be multiple lots that needed separate tracking, then multiple Add Shares transactions.  
  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    Great q_lurker. This form is very helpful. Really appreciate everyone's input.
  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    q_lurker thanks again but when I add shares it Q states it will not adjust the cash balance, which the fee for the certificate does.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    q_lurker thanks again but when I add shares it Q states it will not adjust the cash balance, which the fee for the certificate does.
    Frankly, I was keying mostly off your question: "How to adjust the cost basis?"

    If using a Remove Shares / Add Shares pairing, I would then use a MiscExp to 'spend' the fee paid for the certificate. 

    I am just slightly averse to 'faking' a Buy.  Following that path you end up with Lot 1 with the original basis and Lot 2 of 0.0001 shares with the 'fee-for-certificate' basis.  It probably all works out fine in the long run, but not my preference.
  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    The fee paid is not a miscellaneous expense - under tax (and accounting) rules it is part of the cost of the shares, and is required to be added to the basis of the shares owned on whatever date the fee was paid.  If shares were sold prior to the date of the fee, that sale, or those sales, have nothing to do with the fee.

    There is no "faking" anything - that concept is absurd.  The fee is allocated, pro rata, to the holdings when the fee is paid.

    Frankx

                            Quicken Home, Business & Rental Property - Windows 10-Home Version

                                             - - - - Quicken User since 1984 - - - 
      -  If you find this reply helpful, please click "Helpful" (below), so others will know! Thank you.  -

  • jmcgmckinnon
    jmcgmckinnon Member ✭✭
    Thanks.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Frankx said:
    The fee paid is not a miscellaneous expense - under tax (and accounting) rules it is part of the cost of the shares, and is required to be added to the basis of the shares owned on whatever date the fee was paid.  If shares were sold prior to the date of the fee, that sale, or those sales, have nothing to do with the fee.

    There is no "faking" anything - that concept is absurd.  The fee is allocated, pro rata, to the holdings when the fee is paid.

    Frankx
    The other solution he arrived at had him buying 0.0001 shares that he did not actually buy.  That certainly is 'faking' something.  

    You can have your way.  I can have mine.  One of the 'powers' of this very flexible program that doesn't always have a perfect solution to all real world situations.

    The third solution, and perhaps most appropriate as I think some more - a RtrnCap transaction will adjust cost basis and alter cash in account in one transaction.  To get an addition to the cost basis, one needs to enter a negative amount for the RtrnCap transaction.  That will likewise reduce cash in the account.  That negative amount will be accepted as an in-line entry, but not as a Enter Transactions form entry.  

    OTOH, RtrnCap transactions have been known to not behave well in some cases, particularly with multiple lot situations.  That option would also be worth checking out.  
  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    I am not sure why the OP had to enter one ten-thousandth (that's 1/10,000 !!!) of a share in order get his Quicken app to allow him to record the additional certification cost he incurred - especially since I was able to make the same entry by entering a zero in the shares field to make the same entry. 

    But there's not a court in the land nor even the hardest core IRS agent that would consider that "faking" something (which I have to assume you are implying that "faking" - your word - would be fraud).  The bottom line is that the suggested entry adjusted his cost basis to the correct amount, increased his "share balance" by a factor that is infinitesimally small, and at the end of the day no one can argue rationally that it could be considered fraud.

    Quite frankly I don't see anyway that the Return of Capital transaction is a better route but I don't want to waste any more of my time on trivialities...

    Frankx

                            Quicken Home, Business & Rental Property - Windows 10-Home Version

                                             - - - - Quicken User since 1984 - - - 
      -  If you find this reply helpful, please click "Helpful" (below), so others will know! Thank you.  -

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Frankx said:
    ...

    But there's not a court in the land nor even the hardest core IRS agent that would consider that "faking" something (which I have to assume you are implying that "faking" - your word - would be fraud).  
    And therein lies our misunderstanding.  My term 'faking' was only intended with respect to the Quicken database.  Perhaps a poor word choice, but absolutely no intent on my part to suggest fraud -  legally or otherwise. 

    While I can get the 0-share purchase to work as a transaction entry, I don't get it factored into the later sale.    
This discussion has been closed.