Shouldn't "Cost Basis" Equal Amount Invested

craig.

Last year, a fund I had invested was dissolved, resulting in a loss. The loss calculated in Quicken (R54.16) corresponds to the loss reported on the 1099, but in comparing the Schedule D and Capital Gains Reports (Last Year) to the Security Report (All Dates), NONE of the "Cost Basis" amounts are equal to the amount of my initial investment or the reinvested dividends. The actual amount of the initial investment is much LARGER than the reported cost basis and the actual amount of the reinvested dividends is always SMALLER than the reported cost basis.

In 2022, there was a "return of capital" while the fund was frozen, pending dissolution and no shares were sold. It does not compensate for the difference between the actual initial investment and its reported cost basis. Should I have classified it as something else?

I religiously checked the fund's dividend reports and annual statements to make sure I entered the amounts correctly. Since foreign taxes paid were only identified at the end of the year, they were not always reported as were other dividends, but then neither did they result in the purchase of additional shares, so I'm not certain that impacts my question.

Capital Gains + Amount Invested.pdf

q_lurker

I was guilty of not paying close enough attention to your initial attachment. Looking more closely now, I think I was talking about a different "Amount Invested", about the data shown on a portfolio view, whereas you I think are talking about an Amount Invested column from an Investment Transactions report. It appears your attachment is a Capital Gains report where you have then scabbed on the Amount Invested information for the transactions that acquired the shares being 'sold'.

the differences between the amount invested and the cost basis total the amount of the earlier return of capital.

Is that saying from your attachment - the RtrnCap transaction was $25,627.91 - 24,262.93 = $1,364.98 ? It was only such transaction and occurred in 2022, after all those approx. 640 shares were acquired.

Were all the small share acquisitions Reinvest actions or Buy Shares actions? Were they all entered before the RtrnCap transaction was entered?

With all that being somewhat accurate, I agree with your assessment that the $1,364.98 RtrnCap should have been apportioned to the lots in proportion to the number of shares of each lot, and each adjustment should have reduced the basis of each lot. Now if there were more RtrnCap transactions and some were negative the story might change.

I'd probably be looking at portfolio views on different reinvestment dates to see how those were showing cost basis data by lot at the time of entry.

Jim_Harman

Click on the security name to open the Security Detail View, then click on Edit details. Is Use average cost selected? That will prevent the cost basis for your individual lots to be displayed or used.

I think it will also affect how Quicken calculates the impact of the ROC, so you will probably have to delete and re-enter that transaction.

Back up your data before un-checking this, in case the result is not what you expected.

craig.

Thanks, Jim! That did change the cost basis to something more what I expected. I didn't run the math on the individual lots, but it now appears the Return of Capital was evenly apportioned to all the lots to adjust the cost basis.

Rocket J Squirrel

Cost Basis will only equal Amount Invested if you never sold any shares of the security. Amount Invested is the total amount you ever invested in the security. It does not decrease when you sell shares, as Cost Basis correctly does, unless you sell all shares. Only then will Amount Invested go to zero. If you buy more shares later, it will jump back up to the total you ever bought in that security.

Your question seems more complex than just this answer. Did this answer your question? If not, follow up.

craig.

After further analysis, I see that the differences between the amount invested and the cost basis total the amount of the earlier return of capital. Stil unclear as to how or why those differences were calculated the way they were.

q_lurker

@craig. A return of capital is a cash distribution from the company of money that is not from income the company earned, thus it is not taxable (dividend) income to you.

Instead the distribution is deemed to come from your share of the base value (the capital) of the company being returned to you. As such, your cost basis in the shares you own is reduced. All that is recognized good accounting and tax treatment.

Quicken programmers chose not to apply that process to their Amount Invested term which lacks the universal acceptance that cost basis carries.

craig.

Thanks, but that doesn't explain why, in making the adjustment the actual amount of the initial investment is much LARGER than the reported cost basis and the actual amount of the reinvested dividends is always SMALLER than the reported cost basis. Why not proportionalize (?) that adjustment - all the adjustments would be in the same direction, either larger than the amount invested or smaller, not some one way and other another way.

q_lurker

I was guilty of not paying close enough attention to your initial attachment. Looking more closely now, I think I was talking about a different "Amount Invested", about the data shown on a portfolio view, whereas you I think are talking about an Amount Invested column from an Investment Transactions report. It appears your attachment is a Capital Gains report where you have then scabbed on the Amount Invested information for the transactions that acquired the shares being 'sold'.

the differences between the amount invested and the cost basis total the amount of the earlier return of capital.

Is that saying from your attachment - the RtrnCap transaction was $25,627.91 - 24,262.93 = $1,364.98 ? It was only such transaction and occurred in 2022, after all those approx. 640 shares were acquired.

Were all the small share acquisitions Reinvest actions or Buy Shares actions? Were they all entered before the RtrnCap transaction was entered?

With all that being somewhat accurate, I agree with your assessment that the $1,364.98 RtrnCap should have been apportioned to the lots in proportion to the number of shares of each lot, and each adjustment should have reduced the basis of each lot. Now if there were more RtrnCap transactions and some were negative the story might change.

I'd probably be looking at portfolio views on different reinvestment dates to see how those were showing cost basis data by lot at the time of entry.

craig.

Is that saying from your attachment - the RtrnCap transaction was $25,627.91 - 24,262.93 = $1,364.98 ? 

Yes.

Were all the small share acquisitions Reinvest actions or Buy Shares actions?

Reinvest.

Were they all entered before the RtrnCap transaction was entered?

Yes.

Since all the shares in that fund were sold, it is no longer available to view in Portfolio. Looking at my other funds in that account, which had the one initial investment and reinvestment of dividends, none of those lots showed either the amount invested or the cost basis.

q_lurker

You can customize or select a portfolio view to show the columns you need. In this case, I am mostly interested in the Cost Basis column. Below is a fictitious sample of a portfolio view.

You need to set the view to Group By "Accounts". That will then show a + next to the security which you can click to see the various lots. Your final tweak is to make use of the "As of" date specification.

With that setup, if you set the As of date to 5/5/2011, you should see only the one 405.80 share lot of this security and I expect (if I read things right) the cost basis for that lot would show as the $18,058 value. As you progress through the various dates, the additional lots from each reinvestment should get added. All the cost basis data should be understandable.

As you go from the day before to the day of the RtrnCap entry, the cost basis values should change. If all looks good up to that point and is screwy after that, I'd delete and re-enter the RtrnCap transaction.

Does any of this lead to any other insights?

craig.

I already had the Portfolio view customized to show cost basis, but I forgot about being able to use the "As of" date specification. At no point of ownership does this view show any data for either the Amount Invested or the Cost basis for the individual lots. Here are screenshots for the day before and day of the Return of Capital.

Jim_Harman

Click on the security name to open the Security Detail View, then click on Edit details. Is Use average cost selected? That will prevent the cost basis for your individual lots to be displayed or used.

I think it will also affect how Quicken calculates the impact of the ROC, so you will probably have to delete and re-enter that transaction.

Back up your data before un-checking this, in case the result is not what you expected.

craig.

Thanks, Jim! That did change the cost basis to something more what I expected. I didn't run the math on the individual lots, but it now appears the Return of Capital was evenly apportioned to all the lots to adjust the cost basis.

craig.

Is that saying from your attachment - the RtrnCap transaction was $25,627.91 - 24,262.93 = $1,364.98 ? 

Yes.

Were all the small share acquisitions Reinvest actions or Buy Shares actions?

Reinvest actions.

Were they all entered before the RtrnCap transaction was entered?

Yes.

probably be looking at portfolio views on different reinvestment dates to see how those were showing cost basis data by lot at the time of entry.

I'll do that. Thanks.