Return of Capital allocation

cpajoanne

I know that there have been previous discussions on how Quicken allocates Return of Capital among different lots, but these have been closed, and did not address some important issues. The last discussion I read on this topic was that Quicken allocates ROC based on the number of stock in each lot "and this is the right way to do it". That may be so from Quicken's perspective, but broker statements disagree. In my particular instance, Charles Schwab disagrees. However, Quicken does not allow any adjustment to their auto allocation. The repercussions of this is that stock basis, (and any subsequent sale of stocks' gains or losses) will not match the brokers' statements, which makes any reconciliation very cumbersome for as long as the stock is held. But the big deal is that the Quicken records will not match any 1099 issued by the broker; which negates getting an accurate tax projection; nor does it facilitate downloads to tax software; which, of course, is two of the major reasons of working with Quicken. It seems the fix should be to add a "specify lot" button in the ROC transaction screen, just like the sell stock transaction screen. Maybe easier said than done, (or maybe there is a better solution), but this appears to be an ongoing problem for Quicken users. Please work on it!

Tom Young

"The last discussion I read on this topic was that Quicken allocates ROC based on the number of stock in each lot "and this is the right way to do it". That may be so from Quicken's perspective, but broker statements disagree."

I do think that the standard process for allocating ROCs is by number of shares, though can't provide a cite to an IRS law or reg.  Costbasis.com which seems to be a pretty reputable site for all sorts of corporate actions and other things that affect your basis, does say "If you have multiple tax lots, apply the return of capital payment prorata according to the number of shares in each tax lot.  Corporations pay dividends and return of capital payments equally to each share held on the record date."

But I also know that if you're at all active in trading, particularly in reinvested dividend situations, you're going to run afoul of wash sale rules and trying to understand adjustments to lots' basis in that situation can be near nigh impossible.

However, if you want to get your lot-by-lot basis consistent with what Schwab shows, you can do Remove actions and specify what lots you want to remove, then do Adds to establish those lots back into Quicken with a basis that matches Schwab's.

q_lurker

How is Schwab allocating ROC that differs from per share?  Per share, FIFO, or per basis would be the three I could imagine. 

what is the root cause for the ROC, ie dividend-type distribution, merger, acquisition, spin-off, something else?