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Reinvested Dividends

Paul Freedman

When I download transactions from Merrill Lynch, reinvested dividend come in as three separate transactions. A dividend transaction with a category of _divinc. A withdrawal transaction for the amount of the dividend and a transaction of _divinc and a third transaction for the shares added with no value.

Now in terms of tax reporting this should be okay as the dividend income is offset with the withdrawal transaction and the add transaction is for zero dollars which would have no impact on my taxes.

There are two concerns that I have. One is that all of the add transactions show up as uncategorized. Now they are for zero dollars but nevertheless I am showing a list of dozens of uncategorized transactions that I need to sift through.

The other is should the add transaction have a dollar value. I am concerned that the cost basis for those shares would show up as zero. Are reinvested dividends supposed to be reflected in the cost basis when you sell those shares? Dividends are taxed at one rate but capital gains are taxed at a different rate. At what rate are reinvested dividends taxed when the shares are sold?

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Comments

Rocket J Squirrel

That's a cruddy set of transactions for what should be one simple ReinvDiv in Quicken. I personally would replace all those triplets with ReinvDivs.

The dividends are taxed in the year you receive them. They do add to the cost basis, which is a good thing, as it reduces your gain when shares are sold.

Q97

I delete the downloaded transaction entries and enter one equivalent ReinvDiv transaction.

A reinvested dividend is equivalent to a cash dividend plus a purchase of shares with that cash. When you sell those shares, it’s treated like a regular sale of shares with a short- or long-term capital gain/loss.

Tom Young

Merrill Lynch uses Direct Connect and should be able to at least do a simple dividend income cash deposit, then a subsequent purchase of the stock, using the cash. If I were you I'd pick up the phone and ask to speak with their IT guy that deals with Quicken and ask them to fix it, please.

Actually, Merrill Lynch is a big-boy brokerage outfit that's been around for a long time, who hires highly qualified and knowledgeable employees and, I expect should be getting this right. Too, if this is going on with all ML customers I'd think this information would have been posted a few hundred times by now, but I don't think it has. That leads me to wonder if there's something being missed here. Could you post a snippet of the OFX file that shows what transactions are actually being downloaded into the Account?

q_lurker

This post

https://community.quicken.com/discussion/7866378/merrill-lynch-reinvesting-issue-shares-added-instead-of-bought

suggests the problem has been around for quite a while.

Tom Young

Hmm… Yep, and I found some others as well.

Still, I'd expect ML to get this right and the number of reports of this behavior seems small compared to what I'd expect.

@Paul Freedman @Q97

Have either of you talked to someone at ML about this erroneous accounting ML is sending to you, or will you if you haven't?

Q97

@Tom Young I don’t have an account at ML, but I see similar sub-optimal downloads from my firms, which I just manually recode in Quicken.

Tom Young

@Q97

"Firms?" What financial institutions do you have accounts with?

OFX has been around for a considerable amount of time and the concept of "dividend reinvestment" I'm sure is well understood by most all competent brokers, so I just wouldn't expect the sort of nonsense entries documented here to be wide spread.

Paul Freedman

Well I am now retired and living off Social Security and dividends and interest. So, the problem is less of a factor now that I have changed most of my accounts to take dividends in cash. There are only a very few securities where I continue to reinvest my dividends and those are in my IRA which means I do not have to really worry about the cost basis being correct since the dividends and gains are not taxable and I only pay tax on the amount I withdraw. But still, i think they should report it as a single Reinvestment Transaction.

NotACPA

"But still, i think they should report it as a single Reinvestment Transaction. "

Agreed, but the THEY is ML, not Quicken. Do you really want Q changing what ML sends?