Treasury Bills Reported as capital Gain

jamesevh

Quicken Deluxe 7.2.3 running on MacOS Monterey 12.7

When short term T bills mature, the interest income is mistakenly shown as capital gains in tax reports. The interest is taxable on Fed, tax exempt on most states. T bills are short term zero coupon purchased at a discount and paid at face vale at maturity. Noticed the problem in 2023 when I started buying T bills.

Jim

J_Mike

I have an account with Treasury Direct dealing with T Bills.

ITransaxtions entered into Quicken manually as follows -

Enter a Buy Bonds at the discount price.

At maturity, enter a Sell Bonds at cost (no Cap Gains),

Enter an Interest Income transaction for the interest earned (face value minus cost)

The interest category carries Tax Line Item US government interest

jamesevh

I’ve been purchasing T bills through my Fidelity brokerage account. The Quicken transaction is downloaded directly into Quicken from Fidelity, not manually entered. Quicken tax reports show the interest as a capital gain.

J_Mike

Am curious - how does Fidelity account for the interest earned?

Does your monthly statement reflect it?

or. how is it accounted for in the year-end 1099 form?

jamesevh

Fidelity shows the T-bill as interest on the monthly statements. I’m sure it will also show on the annual 1099, but this is the first year I’ve purchased them. Btw, T-bills are purchased in $1,000 increments, so 100 T-bills = $100,000. Quicken accounts for them in Quicken units of $100, or 1,000 units, but the math works out, except it’s miss classified as capital gain.

J_Mike

Unfortunately QMac is mot able to properly process this transaction from the downloaded information. The FI is doing some manipulations in the background which QMac is not able to do.

In this situation, I would edit the downloaded Sell and adjust the price to match the Buy. Then add the interest income transaction. Your cash balances out and QMac will properly report the tax related info.

jamesevh

T-bills & zero coupon notes are very common and growing in popularity due to rising interest rates. It would be nice if Quicken could address the problem of reporting interest as capital gain.

Thanks

jamesevh

is Quicken for Mac working on reporting interest being shown as capital gains when zero coupon bills/notes mature?

BillB5150

Actually, this is more of a Fidelity issue than a Quicken problem. I recently moved my brokerage account from Vanguard to Fidelity. When I was at Vanguard, a TBill sale triggered two downloadable transactions. The first transaction was a "Sold" transaction, and the amount was equal to my PURCHASE price of the TBill, so capital gain = 0. The second transaction was downloadable as a IntInc transaction, for the amount of the interest earned. The sum of the two transactions was equal to the face value of the TBill. With Fidelity, I get only one transaction for the full amount of the TBill redemption, which causes the short term capital gain to occur. Disappointing they do it that way, but unless Fidelity changes things on their end the only way to fix would be to delete the Fidelity sell transaction and enter two manual transactions to replicate the way Vanguard does it.