How can I adjust my cost basis of mutual funds after a sale?

The cost basis is totally different between Quicken and brokerage statement.

Best Answer

  • Rocket J Squirrel
    Rocket J Squirrel SuperUser ✭✭✭✭✭
    Answer ✓
    In Quicken, find the Buy and/or Add Shares transactions which added the shares to your account. Correct the costs in those transactions to match the broker's.
    Quicken user since version 2 for DOS, now using QWin Premier Subscription (US) on Win10 Pro.

Answers

  • Rocket J Squirrel
    Rocket J Squirrel SuperUser ✭✭✭✭✭
    Answer ✓
    In Quicken, find the Buy and/or Add Shares transactions which added the shares to your account. Correct the costs in those transactions to match the broker's.
    Quicken user since version 2 for DOS, now using QWin Premier Subscription (US) on Win10 Pro.
  • teratack
    teratack Member ✭✭
    I entered 0 shares and then the dollar amount. Now my cost basis in investments is correct. Does that affect other reports? Thank you so much! Simple fix!
  • NotACPA
    NotACPA SuperUser ✭✭✭✭✭
    IF on sale transactions you don't inform the brokerage of WHICH lots to sell, they will almost certainly select FIFO.
    If you select something different, say "Minimum Gain", or LIFO, then your Cost Basis info will differ from what the brokerage reports.
    If you're doing a "Sell All", then it doesn't matter ... but for partial sales this matters.
    If it's not too many sales, then you might want to consider going back  and adjusting the Sale transactions.
    Q user since DOS version 5
    Now running Quicken Windows Subscription, Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    teratack said:
    I entered 0 shares and then the dollar amount. Now my cost basis in investments is correct. Does that affect other reports? Thank you so much! Simple fix!
    I don't think that's the best approach and probably not what @Rocket J Squirrel had in mind.  Assuming that your basis in total and in detail (lots) matched the broker's record, and you'd like to keep your Quicken file in "sync" with what the broker is reporting, then the way to do that is to edit the Sale transaction and select the lot or lots that the broker actually sold.  
  • teratack
    teratack Member ✭✭
    I understand now that what I did is wrong. I did go back and pick the lots that the broker said they sold, but they must have used avg method, because their cost basis and Quicken did not match. So I restored back up, told Quicken to use average cost, redid sale, still not the correct cost basis. I was so frustrated after trying to get this to balance for 3 days, that I misread what @Rocket J Squirrel said, made that entry and closed it to finish up today. I have 3 more sales to enter. So are there entries that I can make to make it all balance?
  • teratack
    teratack Member ✭✭
    Clarify: The purchase of the lots matched brokerage. The cost of the sale did not match.
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    edited January 18
    If some of the mutual fund lots were purchased prior to 2011, the brokerage is probably using average cost for those lots and specific lots for post-2011 lots.

    If you have your own data on which pre-2011 lots were sold, you *may* be able to use that when preparing your taxes.

    DISCLAIMER - I am not a tax advisor. You should consult your own tax advisor.

    [adding]
    If you expect that in the future you will sell your whole position and not part of it, you can do the following to force your total cost basis to match your broker's records:
    • Back up your data in case you do not like the result
    • Enter a Removed transaction for all the shares you currently hold
    • Enter an Added transaction to put the shares back in your account. Set the total cost to match your broker's records and the Acquisition date to more than one year ago if you want the sale to be recorded in Quicken as Long term.
    If you have the detailed tax lot information from your broker, you could enter an Added transaction for each of the tax lots. This would be very tedious if you have years of reinvested dividends.
     
    QWin Premier subscription
  • teratack
    teratack Member ✭✭
    I have tried add/remove transactions, etc. I am not doing something right.
    I sold a few shares of XYZ mutual funds for a long term capital loss to offset some gains for tax purposes. My shares balance is correct, my market value is correct, my cost basis is incorrect due to the fact that Quicken overstated my loss on the sale (Edward Jones used avg cost on the sale.) so therefore my capital gains/loss are incorrect. I will make adjusting entries of any kind to make it balance. I just don't understand what kind of transactions to make. I guess I need a detailed example if that would be possible. Thanks!
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    Have you sold shares of this security in the past with different lot settings than what Edward Jones used? If so, then your cost basis prior to the sale was probably wrong also and you will also need to correct those transactions.

    If this is the first sale and Edward Jones used average cost, did you try deleting the downloaded transaction(s) for the sale, selecting Use Average cost in the Security Details in Quiceken for the security you sold, then entering the transaction again?

    Always back up your data file before changing historical transactions.
    QWin Premier subscription
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    A checkpoint for me would be the values in Quicken before the sale.  Pull up a portfolio view (Ctrl-U) customized to that account, be sure Cost basis is a visible column.  Group by accounts.  Set the As of Date to 1 day before the sale.  If it helps, click the + next to the security name and view the individual lots.  Were the data (shares, cost basis, market value) in agreement with EJ.  There is also an Average Cost per share that can be viewed for the entire security holding in that account.       
  • teratack
    teratack Member ✭✭
    Everything was correct before the sale. This is the first time I have sold any of the funds. I tried to use the average cost method, it came up with a closer amount, but it still off by over 1000.00. Is there not a way to make a Journal entry to correct the differences? Debit Cost basis and Credit Long Term Capital Gain/Loss?
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    teratack said:
    Everything was correct before the sale. This is the first time I have sold any of the funds. I tried to use the average cost method, it came up with a closer amount, but it still off by over 1000.00. Is there not a way to make a Journal entry to correct the differences? Debit Cost basis and Credit Long Term Capital Gain/Loss?
    We have already told you how to do that. Remove all the current shares and Add back each tax lot with the correct cost basis and acquisition date. 
    QWin Premier subscription
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    The shares and cost basis agreed before the sale. If both Quicken and the brokerage used the simplest average cost for the sale the check should be simple. 
    Total Cost x Shares Sold / Total Shares = Cost of Shares Sold.
    Which one did not do that?  Quicken or Brokerage?  
    I’d guess brokerage has a more sophisticated average cost approach perhaps considering long term and short term. If so, ask them to explain it. 
    From what you’ve determined so far, perhaps before sale,
    • Remove XX shares sold,
    • Add XX shares at sale cost basis,
    • Sell those shares
    After sale
    • Remove balance of shares
    • Add Balance of shares at brokerage shown post sale basis. One lot
    For me, this is a basic reason not to use Average cost. It is not as simple as it might seem. 

  • teratack
    teratack Member ✭✭
    Thank you q_lurker. You were right, the average cost from Brokerage more complex. Your explanation of how to fix the balances works great.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    teratack said:
    Thank you q_lurker. You were right, the average cost from Brokerage more complex. Your explanation of how to fix the balances works great.
    Follow up comment. This means going forward you are sort of locked in. That is you are not carrying forward with the lot-specific holdings. 

    This may affect some of Quicken’s performance measures like ROI%. Average annual return should not be affected but be alert if such considerations are important to you.