Entering a commision rebate

I have a new investing account and my broker is charging me a commission when I enter my trade, but then credits me back the commission some days later. I am entering these manually. What is the best transaction type to use for this entry and shud I be splitting out the commission from the original transaction?
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Answers

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    The first thing to determine here is how the broker is going to be reporting this information to the IRS.
    For a Buy the commission adds to the security's basis and for a Sell the commission reduces profit/increases loss.  I'd think the broker would report these transactions to the IRS "as if" there was no commission charged in the first place, but find out from the broker.
    Frankly I find it a more than a little silly that the commission is handled in this fashion as it only makes for more work on your part.
    IF the broker will be reporting information to the IRS "as if" no commission was charged in the first place (i.e., after the credit back)  then I'd be tempted to enter the transactions WITHOUT the commission recorded in the first place to.  That will mean at times you'll have a commission or two (depending on your frequency of trading) as an outstanding item (essentially a "deposit in transit") in a reconciliation between cash in the Account per Quicken vs cash in the account per broker but I wouldn't think it would be a big deal and could easily be managed "outside" of the Account.
    Another way of approaching this would be, again, to enter trades "as if" there were no commission charged, then immediately enter the commission (reduction in cash in the Account) against some Category that you make up, like "Broker Commissions."  The credits back would also be recorded against that same Broker Commissions Category, and the cumulative net "expense" in this Category would/should reflect the number of "credits back" you're owed.
    There's other ways of dealing with this situation but the problem is that the broker commission, if any, is integral to the calculation of basis, net proceeds and gain and loss and those attributes are tied to actual Buy and Sell transactions.