Capital Gains Using Average Cost Method?

hawks28

Hello, I am trying to match the capital gain reported by my brokerage firm on the 1099-B for a mutual fund sale in 2021. The firm uses the average cost method.

I checked the option to "use average cost" for the mutual fund under Window > Security > specific security. However, checking that box didn't seem to change anything. It looks like QuickenMac still has the sale going through with specific lots. If I try setting up a new sale transaction I can specify lots or one of the pre-set options, but average cost does not seem to be an option.

Hopefully I'm missing a nuance on how to set this up correctly in QuickenMac so that it calculates capital gains using the average cost method. Thanks in advance!

jacobs

@hawks28 I'm sorry to say you're not missing anything; Quicken Mac does not support using average cost basic for securities. The cost basis for investments is set at the account level, not the security level. To see this, click on your brokerage account, and select Settings from the Accounts window. At the bottom, you'll see where you can set the cost basis for stocks, bona, mutual funds, and other securities. The options for each are limited to FIFO and LIFO.

As a result, if you have a mutual fund which uses average cost basis, Quicken's calculation of the gain on your sale will be wrong. 

It has puzzled and frustrated me that Quicken Mac hasn't added the ability to use average cost basis. Average cost is the default basis for Vanguard and many other large mutual fund companies, and is required for Canadian investors. I know there are many feature requests for Quicken Mac, and the developers have to sort out which ones get addressed and which ones wait, but this seems pretty significant: Quicken is producing wrong data results for many users.

I have Vanguard funds which use average cost basis, so I've reconciled myself to relying on the 1099 from the broker and ignoring what Quicken shows as my gain. 

But what about that "Use average cost" box you noted on the Security setting window? Unfortunately, you'll notice it's under a box for Back Load percentage. This box is for a back-end load which some mutual funds charge when shares of a security are sold. That said, I can't explain why Quicken has this checkbox for average cost relating to back-end sales fees. (Generally, back-end loads are either a flat rate, or a rate which declines based on how long you have owned the security, and Quicken doesn't give you a way to specify a different fee based on different durations.) I don't own any mutual funds with back-end sales loads, so I've never investigated this much. In limited experimentation, I found that filling in a load percentage doesn't appear to affect an entry selling a mutual fund holding; I would expect it to create a sales fee transaction. I can't figure out if this section of the security settings screen actually does anything! It doesn't appear to. Did a designer copy this from Quicken Windows, but a programmer never wrote code for it to do anything??  All I know is this: whether I check the box or not, it does not cause a mutual fund sale to use average cost basis. 

There is a feature request thread on this site asking the developers to add average cost basis to Quicken Mac; please take a few seconds to go to this page and add your vote for it (click the little black triangle under the voter count in the yellow box under the first post).

jacobs

@hawks28 I'm sorry to say you're not missing anything; Quicken Mac does not support using average cost basic for securities. The cost basis for investments is set at the account level, not the security level. To see this, click on your brokerage account, and select Settings from the Accounts window. At the bottom, you'll see where you can set the cost basis for stocks, bona, mutual funds, and other securities. The options for each are limited to FIFO and LIFO.

As a result, if you have a mutual fund which uses average cost basis, Quicken's calculation of the gain on your sale will be wrong. 

It has puzzled and frustrated me that Quicken Mac hasn't added the ability to use average cost basis. Average cost is the default basis for Vanguard and many other large mutual fund companies, and is required for Canadian investors. I know there are many feature requests for Quicken Mac, and the developers have to sort out which ones get addressed and which ones wait, but this seems pretty significant: Quicken is producing wrong data results for many users.

I have Vanguard funds which use average cost basis, so I've reconciled myself to relying on the 1099 from the broker and ignoring what Quicken shows as my gain. 

But what about that "Use average cost" box you noted on the Security setting window? Unfortunately, you'll notice it's under a box for Back Load percentage. This box is for a back-end load which some mutual funds charge when shares of a security are sold. That said, I can't explain why Quicken has this checkbox for average cost relating to back-end sales fees. (Generally, back-end loads are either a flat rate, or a rate which declines based on how long you have owned the security, and Quicken doesn't give you a way to specify a different fee based on different durations.) I don't own any mutual funds with back-end sales loads, so I've never investigated this much. In limited experimentation, I found that filling in a load percentage doesn't appear to affect an entry selling a mutual fund holding; I would expect it to create a sales fee transaction. I can't figure out if this section of the security settings screen actually does anything! It doesn't appear to. Did a designer copy this from Quicken Windows, but a programmer never wrote code for it to do anything??  All I know is this: whether I check the box or not, it does not cause a mutual fund sale to use average cost basis. 

There is a feature request thread on this site asking the developers to add average cost basis to Quicken Mac; please take a few seconds to go to this page and add your vote for it (click the little black triangle under the voter count in the yellow box under the first post).

hawks28

@jacobs, thanks for your through explanation which makes sense (from an explanation standpoint, but not from a Quicken Mac product development/feature standpoint).

I added a vote to the thread you mentioned and would suggest others check how their mutual fund companies are handling the cost basis (likely average cost) and then take a few seconds to go to the link below to add your vote to improve Quicken Mac (click the little black triangle under the voter count in the yellow box under the first post at the top of the page).

https://community.quicken.com/discussion/7670157/cost-basis-adjusted-cost-basis-acb/p1