Cost basis does not match

I created an investment account, manually entered the purchase of 3 mutual funds (firm does not interface with Quicken.) A year later, I sold proportionate amounts of each fund, again manually entering the sales in Quicken. Every detail - share price, number of shares, and total cash - matches my statements. My problem is that the cost basis after that single day's entries does not match the reality. It's easy to add and subtract those 6 figures, and Quicken is off on the overall total as well as each of the 3 mutual funds.

Answers

  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    Were there any complicating factors such as commissions, reinvested dividends or capital gains distributions, etc that might have affected the numbers?

    Is this a small difference that might be due to rounding, or something larger?
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  • eekfleming
    eekfleming Member ✭✭
    No commissions, dividends, etc. Invested a large, round amount in December 2019. Sold shares and withdrew cash in October 2020. Each of the three sale transactions matches shares, price/share, and proceeds to the penny. Cost basis is just plain wrong. The total difference is small, but holding steady over the past quarters. Each fund basis has large differences - two show higher cost basis, one lower, which net out as the overall difference.
  • eekfleming
    eekfleming Member ✭✭
    I sold about 1/3 of the original investment, in the same proportions as when the money was invested.
    I have since invested more, and the cost basis is still off by the same overall and per fund amounts.
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    Ok, go to the account and click on Holdings. Set the As of date to the day before the sale. Do the share counts and cost basis match what you originally paid, and your statements?

    If not, there may transactions you have not entered, or you may have placeholders that are affecting things.

    To make sure placeholders are visible, go to Edit > Preferences > Investment transactions and make sure Show hidden transactions is selected.
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  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    " share price, number of shares, and total cash - matches my statements. My problem is that the cost basis after that single day's entries does not match the reality."
    I notice that in your enumeration of "matches" you don't mention "basis".  A very obvious reason that your Quicken basis doesn't match "reality", (assumed to mean what the financial institution indicates), is that you, in Quicken, used a different costing mechanism than the financial institution used.  If all your transactions up to the sale date match the financial institution's in every way, shape and form, then that very likely is the cause of the difference.
  • Rocket J Squirrel
    Rocket J Squirrel SuperUser, Windows Beta ✭✭✭✭✭
    In other words, it is possible that the lots Quicken thinks were sold are different from the lots the brokerage actually sold. Lots are typically sold in FIFO order and Quicken generally assumes that. But maybe the brokerage chose a different set of lots, perhaps to minimize taxable capital gains.
    One random thought: you're really talking about the Quicken quantity Cost Basis, right, and not confusing that with the Quicken quantity Amount Invested? They are not the same and will always differ after shares are sold.
    Quicken user since version 2 for DOS, now using QWin Premier Subscription on Win10 Pro.
  • eekfleming
    eekfleming Member ✭✭
    I appreciate everyone's helpful suggestions. In response to this post, I admit I don't understand the difference between quantity cost basis and quantity amount invested.
    I will emphasize the simplicity of my situation. I made one purchase (in a 529 account) on a single day in December 2019. There have been no capital gains, dividends or other income. On October 26, the cost basis correctly reflected my original investment amount. On October 27, 2020 I liquidated approximately 1/3 of the original investment, split among the 3 mutual funds. My Quicken entries for the sales exactly match the statement, with no rounding differences. My total cost basis for the account is off by $11.60. Two funds indicate a higher cost basis (off by $192.30 + $70.93), and one indicates a lower basis (off by $274.83).
    The only solution I can imagine right now is to delete the entries and try again. Unfortunately, this crosses the year end mark, so my 2020 year-end file will be incorrect forever.
    Thanks for your help.
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    Aha. When you sell a security, the cost basis of the security should go down because you now hold fewer shares. The cash in the account will increase by the amount of the proceeds.

    The account's cost basis should increase if the security's price increased or decrease if it went down. The difference is the capital gain or loss.

    So it is not clear how the cost basis of two of your funds could have increased after you sold some of the shares. Are you sure you are looking at cost basis and not something else?
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  • eekfleming
    eekfleming Member ✭✭
    Without showing you my exact numbers, yes, I am looking at the cost basis on the "holdings" screen. Let's just say that I invested $10,000, later liquidated shares in exchange for $3,000. There were no dividends or capital gains. My cost basis should be $7,000. Quicken calculates it as $6,988.40. The statement from the financial institution reflects the correct cost basis of $7,000.
    I understand that the market value will rise and fall with the share price, but the basis should remain steady.
    I made a copy of my file, then deleted and re-entered the sales transactions. Sadly, I had the same result. There are no hidden placeholder transactions.
    Thank you for your help.
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    edited April 9
    The $3000 sales proceeds would not reduce your basis to $7000 if the share price has changed. If your original purchase of $10,000 bought 300 shares and you sold 100, your basis would be reduced to $6,666.67, regardless of the proceeds of the sale. 
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  • markus1957
    markus1957 SuperUser, Windows Beta Beta
    Being a mutual fund, the cost basis can be tracked on an average cost basis or lot basis.  If you choose a different method in Quicken than used by the 529 manager, your cost basis will diverge over time as you sell shares.
  • eekfleming
    eekfleming Member ✭✭
    I agree that my cost basis should be 2/3 of the invested amount, regardless of the proceeds and share price at sale time. It isn't. I have contacted Quicken Support, and the technician agreed. I have reported the issue, and hope for a resolution. Thanks for all your helpful suggestions.
  • eekfleming
    eekfleming Member ✭✭
    Uh-oh, I think I just figured it out, but I don't necessarily like it. Quicken adjusted my cost basis to reflect realized gains and losses. I suppose that is correct for taxes and things, but it really threw me for a loop. Moving on with my day.
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    "Quicken adjusted my cost basis to reflect realized gains and losses. I suppose that is correct for taxes and things, but it really threw me for a loop"
    That should absolutely not be the case.  When you sell some or all of a security the cost basis associated with that security literally disappears.  What replaces that cost basis is the cash from the sale.  If it happened that you sold that security for exactly what you paid for it then the cash amount would equal the "missing" security.  If you sold the security for more or less than the cost then the cash would be more or less than the missing security, and the "balancing" accounting entry would be to a Category called capital gain or loss.  There's no "basis adjustment" associated with the sale beyond the disappearance of the cost basis of what was sold.
    It sounds like your transaction list for this Account has all of 6 entries in it - 3 purchases on one day and 3 sales on a different day.  Why don't you publish those transactions here - actual screen shot of the 6 transactions - and let up calculate the entries?  Quicken support techs aren't accountants but there's plenty of people in here that are.
  • eekfleming
    eekfleming Member ✭✭
    Ooh, excellent point. I appreciate your help. I'm reluctant to post these real numbers in a public forum, but I'd love to understand how this has gone wrong. Here goes.
  • eekfleming
    eekfleming Member ✭✭
    Here's a shot of the holdings screen:
  • markus1957
    markus1957 SuperUser, Windows Beta Beta
    The cost basis of the 3 holdings shown in the holdings screen match the cost basis calculated by hand. 
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    Everything looks correct to me:

    So what are you comparing to for the differences you've cited?
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