How does Quicken calculate the cost basis?

Ed Vigdor

Hi,

My accounts were just recently transferred from TDA to Schwab. While going through the new accounts I discovered that the cost basis showing up in Quicken does not match with that is being reported from Schwab OR as showing on my TDA statements.

All my transactions have/are downloaded from TDA and Schwab. The cash in/out is reconciled monthly, so I know the dollar amounts are accurate. That being said, why is the cost basis in Quicken different then those reported by the institutions/statements?

How does Quicken calculate the cost basis of a holding that has multiple buy/sell transactions over time? (No automatic reinvesting of dividends)

jacobs

Quicken Mac does not use Average Cost Basis; in fact, this is a long-standing feature request for users who have mutual funds which use Average Cost. Quicken Mac also doesn’t have an options to sell shares based on minimizing taxes.

Quicken Mac gives you the option of using FIFO OR LIFO on the settings screen for each account. Further, when you sell shares, you have the option to manually select the lot(s) sold to match what you did in the real world.

Because I have accounts which use average cost in the real world, I have had to accept that what Quicken shows me is an approximation of my gain/loss rather than an exact value. I have to use the brokerage’s values for actual tax reporting.

NotACPA

When you sold securities, did you tell your brokerage/firm WHICH specific lots to sell? If not, they probably sold LIFO.

Which lots did you record, in Q, as being sold.

If the lots that your brokerage/firm sold, and what you recorded in Q, differ … your cost basis in Q will differ from their records.

jacobs

If you created a new Schwab account, how was the data in that account populated? Quicken Mac has a utility for migrating accounts from one brokerage company to another; it creates Remove Shares transactions in the old account and Add Shares transactions in the new account, on the proper dates, so your cost basis should be preserved accurately. If you simply downloaded from Schwab, then the question is what data did they download to Quicken? If they just downloaded an Add Shares transaction for each security in your account as of the transition date, then there's no way for Quicken to know what your true cost basis was.

Ed Vigdor

I have tracked all my transactions on quicken from TDA for years, downloading from their servers or Quicken accessing their servers. The shares and $$ amounts for each transaction is accurate

The problem and question is, is there is a difference in the accounting method used by TDA/Schwab and Quicken to calculate cost basis? There is!!

When a specific stock has multiple buy/sell transactions over time, the institutions use a method that takes loses first and potential gains are held longer for tax purposes.

I’ve learned that Quicken, in the same scenario, calculates the average cost per share to come to a cost basis over the course of multiple buy/sells for an individual stock. This is actually not accurate result. Or at the least for tax purposes is less the ideal for reporting.

If someone uses quicken to generate cap gains reports I am curious if that report matches what the institution reports on a 1099. I don’t know as I’ve never used quicken in that manner.

Appreciate you taking the time to reply.

Tom Young

"The problem and question is, is there is a difference in the accounting method used by TDA/Schwab and Quicken to calculate cost basis? There is!!"

I don't see any problem whatsoever in my old TD Ameritrade Accounts.

The positions - number of shares and cost bases - should have absolutely transferred over intact. There is no way in the world Schwab would have somehow taken a different tack and changed the costing method used for sales. Too many customers would be irrevocably harmed if such a thing happened.

When you establish a mutual fund security in Quicken you're the one that sets the costing method Quicken will use. Brokers will typically use FIFO as the default but the customer can always select a different method.

jacobs

Quicken Mac does not use Average Cost Basis; in fact, this is a long-standing feature request for users who have mutual funds which use Average Cost. Quicken Mac also doesn’t have an options to sell shares based on minimizing taxes.

Quicken Mac gives you the option of using FIFO OR LIFO on the settings screen for each account. Further, when you sell shares, you have the option to manually select the lot(s) sold to match what you did in the real world.

Because I have accounts which use average cost in the real world, I have had to accept that what Quicken shows me is an approximation of my gain/loss rather than an exact value. I have to use the brokerage’s values for actual tax reporting.

Ed Vigdor

Jacob

thanks. What you are saying is different than what the Quicken customer support person told me on the phone.

I trust your knowledge more.

I’ll check on those setting selections but CBS will still be different from Schwab. Which is ok now that I understand why. I can pull reports from them or get information from my financial managers who oversee my investments.

Thanks again

NotACPA

When you sold securities, did you tell your brokerage/firm WHICH specific lots to sell? If not, they probably sold LIFO.

Which lots did you record, in Q, as being sold.

If the lots that your brokerage/firm sold, and what you recorded in Q, differ … your cost basis in Q will differ from their records.

jacobs

@NotACPA said: When you sold securities, did you tell your brokerage/firm WHICH specific lots to sell? If not, they probably sold LIFO.

It depends on the type of security and the brokerage. Vanguard, for instance, uses a default of average cost basis for mutual funds and FIFO for individual stocks, unless an investor has selected another basis method prior to a first sale.

NotACPA

My typo. I meant to type that the brokerage default would be FIFO

Ed Vigdor

Thanks to everyone who have left their thoughts!

First, I don't own Mutual funds, which most certainly can get more complicated determining cost basis.

I don't execute trades, I have financial institutional managers independent of TDA or Schwab.

The cost basis from my last TDA statement and what Schwab is showing on my accounts match exactly, so that data did transfer consistently.

From what I have seen on the Schwab site, they use FIFO, which match my settings in Quicken. I cannot yet say Schwab uses a different method to maximize tax benefits for an institutional investor, as I am.

In the process of going through all my accounts to find specific problems. Most of my holdings match from Quicken and now Schwab. Some do not.

Ed Vigdor

https://community.quicken.com/discussion/comment/20384766#Comment_20384766

NOT ACPA… as a managed institutional investor, I do not direct anything when securities are sold. But I agree with your point completely.

Tom Young

At Schwab you can control the default method of costing used for security sales:

If you have managers directly signing into Schwab to execute trades, they could set this up for you.