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I have entered into Quicken a cash distribution as a return of capital, but it does not show

Dennis Goldstein

I have received and entered into Quicken a stock cash distribution as a return of capital, but it does not show up in Budget or Investment reports under Return of Capital (which is a subcategory of Miscellaneous Cash Flow). Any suggestions as to how to make the reports pick up the return of capital?

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q_lurker

Budget -- I can't comment on
Investment Reports -- Which ones, specifically? By design it should appear in some (Investment Transactions), but not in all cases of Investment Performance (for example).

Tom Young

Are you using the Mac version by any chance?

The reason I ask is that in the Windows version you enter a return of capital using a RtrnCap "action" and unless you've customized an Investment Report to specifically exclude that action it should show up.

You also mention that return of capital "is a subcategory of Miscellaneous Cash Flow" and, again, unless you've done sort of customization that you haven't explained I'm not quite sure how you'd accomplish that in the Windows version. A return of capital isn't a "Category" in the usual sense of that word in Quicken - an "income" or "expense."

Dennis Goldstein

I am using a PC. Return of Capital does show up as a subcategory of Miscellaneous Cash Flow in my category list.

How would you enter a Return of Capital from an equity?

q_lurker

Dennis Goldstein said:

How would you enter a Return of Capital from an equity?

With a RtrnCap transaction. Enter Transaction button, action = Return of Capital. Or in the transaction list, action field = RtrnCap.

Dennis Goldstein

To Tom Young:

Sorry, it took me a while to get back to this issue. Thank you.

You are correct in that I had confused "category" with "action". I went back and changed the transaction to be a "dividend" and in the miscellaneous box I entered the entire amount as a Miscellaneous Return of Capital which shows up as a sub-category of Miscellaneous Cash Flow. This seemed to fix the report issue in that it now shows up in reports, but it created another issue in that despite its categorization as a Return of Capital, the program did not reduce my basis in the stock.

Do you have any idea how I can get Quicken to reflect the new, reduced basis?

q_lurker

I'd say you can't have it both ways. I'd say normally return of capital should not be considered a 'category' transaction (either income or expense). It is simply removing cash from the investing pocket (cost basis) into the cash pocket. RtrnCap will adjust the basis. Your MiscInc approach will feed your 'Misc Cash Flow' category. You don't get both without other shenanigans.

A possibility -- For the RtrnCap transaction, specify the 'Transfer account' as the same account used for the transaction. That should reduce the basis of the security and not change the cash balance of the account. I can't say what other subtle or obvious impacts that might have on other areas. It is not a step I would use except in unusual circumstances. (Your MiscInc action would still be necessary to feed your Misc Cash Flow category making it two transactions.)

Tom Young

A return of capital puts cash into the Account and reduces the basis of the security. The correct approach here is to simply record the receipt of the cash as a RtrnCap "action" and you're done.

More commonly you find out about returns of capital sometime after year end when the 1099-DIV arrives, having recorded all the "dividends" for the year using the Div action. In this case the proper approach is a pair of 12/31/XX entries along the line of:

Debit (decrease) Dividend Income for Company X $XXX (Div action w/negative #)
Credit (decrease) Cost Basis for Company X $XXX (RtrnCap action w/positive #)

If for some reason you want to see this Return of Capital in some report somewhere you should be able to see it by including the "Uncategorized" Category which should show the return of capital amount.

(The word "should" is in italics because that's where Quicken has always shown a return of capital in the past. I tried a test of two reports using an Account with a RtrnCap action in it and a period of time that covered that transaction and in both cases the "top level" reports showed "$0.00" as the amount for "Uncategorized." But when I clicked through on the "$0.00" amount, the return of capital transaction and the dollar amount did show on the subsidiary report. Another Quicken bug.)

Dennis Goldstein

Thank you, Tom. That's helpful.

Bottom line I must choose between Quicken showing the wrong basis or overstating my income (at least for tax purposes). BTW, I know this distribution is a return of capital because the company has told me that it will be shown on the 1099 that way. In fact, the company has no choice, as it has no retained earnings from which to make a "dividend."

I looked at it both ways and if I record it as an "action of return of capital and run an "investment income" report, I can as you suggested, click on the "uncategorized" line item and the Return of Capital does then display. I think this is probably the better way to leave it.

Just to see what would happen, I ran a current budget report with the distribution recorded as an "action" of return of capital. This report completely ignores the distribution and I cannot get it to display an "uncategorized" line item for reasons I do not understand. This is not surprising as I find the Budget feature almost unusable in any depth. I have tried several times to make a Budget that reports something useful, but my patience has always exhausted itself before I met with any success.

Quicken does, as you point out, have its bugs.

Thanks again.

q_lurker

Bottom line I must choose between Quicken showing the wrong basis or overstating my income (at least for tax purposes).

The RtrnCap transaction will properly (in most cases) reduce the cost basis of the existing holding and will not overstate your taxable income. Right basis and right taxable income. The amount returned will not show up in Quicken's tax reports. (No comment on its tax planner; I don't use it. Nor do I use the budget tools.) It is the correct path from the investment perspective. The issue was your need to force something into your Misc Cash Flow category.

RGM1714

My dilemma follows along the thoughts in this thread. I received my 1099 and some of the "dividends" I received this year for Kinder Morgan are in fact a blend of dividend and a return of capital. I naively went back to the original entry, reduced the original dividend amount down to the correct dividend figure, then created a new Return of Capital transaction for the balance. While my cash balances are still correct, the Cost Basis of the KMI stock was NOT reduced by the amount of capital returned. Since I subsequently sold some of my shares, my capital gains are now inaccurate. Any insights would be appreciated.

Tom Young

A RtrnCap action should reduce the basis of the selected security. Is that the action you used? Or, did you use some Return of Capital Category? The latter won't reduce the basis.

RGM1714

Hmm, That is a difference of which I am not familiar. I originally entered the transaction as "Inc - Income" using the drop down menu from the top of the register labelled "Enter Transaction" and used the Dividend line to enter the amount. When I received my 1099 and learned of the redefinition of the amount received as being partially a dividend and partially a return of capital, I highlighted the original transaction and hit EDIT to reduce the dividend amount and then added a new transaction The entry in the register for the new transaction shows RtnCapX as the Action. However, the Cost Basis remains unchanged. There were two dividends received during the year that were impacted by redefintion but neither correction resulted in the Cost Basis being changed.

Dennis Goldstein

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