Can anyone tell me how Quicken calculates RtrnCap?

medleymi

I am not able to duplicate the results that Quicken produces. I have many occasions when I need to do a return of capital and it affects multiple lots (e.g., dividend reinvestment). I can do the calculation in a spreadsheet, and the overall result for all lots is the same, but I don't get the same per-lot reduction in cost basis that Quicken gets. I think one needs to reduce each individual lot by the same ratio. In my case today, this is the percentage of the basis that remains after a spinoff or merger. The ratio is based on the closing price of the two companies involved. But Quicken appears to use a variable ratio and I can't tell where it originates. Does anyone know the details of how Quicken applies the reduction across multiple lots?

q_lurker

The process has varied over the years, so it may depend on what Quicken year/edition you are using.

I believe the current subscription version is applying the RtrnCap total amount to the various lots on a per-share basis.  A lot of 100 shares will get twice the reduction in basis that a lot with 50 shares gets, without regard to the basis of the two lots.  While that is correct for some cases, it is not correct for all cases, as you cite.  Typically a RtrnCap as part of a dividend reinvestment would be on a per share basis.  You get $X per share; a percent of that is (later?) characterized as RtrnCap with the balance still a dividend.  The RtrnCap portion is thus still a per share distribution.  But I do not suggest that is an absolute by any means.  

The Corporate Spinoff case is one where the RtrnCap basis adjustment should be in proportion to the basis of each lot.  I have an Idea post here
https://community.quicken.com/discussion/7901982/fix-corporate-spinoff
suggesting the general RtrnCap action be broadened to be applied either per lot shares or per lot basis.

medleymi

If I'm understanding you correctly, it doesn't look like this is how it's working either. Let me try a hypothetical numerical example. Suppose you have a return of capital of $10k on a $25k investment. Your original basis (of 20 total shares) is 5 shares at $5k and 15 shares at $20k (20shares@$25k). Would the per-share method of reduction you describe be 5/20 *$10k ($2.5k) and 15/20*$10k ($7.5k), respectively? Meaning your ending basis is $5k-$2.5k = 5shares@$2.5k and $20k - $7.5k = 15shares@$12.5k? The new total basis remaining is 20shares@$15k. This works mathematically but, if this is what you mean, that is not the result that Quicken 2017 is giving me.

q_lurker

Would the per-share method of reduction you describe be 5/20 *$10k ($2.5k) and 15/20*$10k ($7.5k), respectively?  Meaning your ending basis is $5k-$2.5k = 5shares@$2.5k and $20k - $7.5k = 15shares@$12.5k? 

Yes, and that is what the subscription edition currently produces.

I do believe there was a short time where Quicken also attempted to process on a FIFO-style rule.  That would have been 5 shares (lot 1) reduced from $5k to $0, and then the remaining $5k deducted from lot 2 leaving 
5 shares at $0 basis
15 shares at $15k basis.

What are you seeing with your 2017 edition?

medleymi

Actually, with this simple hypothetical example, Quicken gave the result above. It doesn't appear to be doing that on my complex, real-world position that has over 200 lots, though. Possibly it's confused. I'll probably need to step through it to figure out where the breakdown was, but I think I can do that now that we've verified what the expected result should be. Thanks for the reply