addition to investment transaction entry for Return of Capital

Howard1
Howard1 Member ✭✭
edited March 8 in Investments

Sometimes mutual funds reclassify income at year end in the 1099-DIV forms: The income that was reported during the year as ordinary dividends is reclassified as return of capital. The reclassification is documented in federal form 8937. This return of capital has to be recorded as such in Quicken in order to determine the future cost basis of the shares. The Quicken Enter Transactions window for transaction type Reinvest does not include a line for Return of Capital. Therefore, to record the reclassification data from federal form 8937, one must, for each month listed in the 8937, first revise the original entry in the "Reinvest" window , then record the reassigned return of capital as cash income in the "Return of Capital" window, and then record the reinvestment of that cash in the "Buy Shares" window. If a field for Return of Capital were included as an entry in the Reinvest window, the data entry would be quite easier.

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  • QuickUserPSP
    QuickUserPSP Member, Windows Beta Beta

    @Howard1 there is a Return of Capital transaction already in Quicken. Would that help with your situation?

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭

    @Howard1 I can empathize though I don't have any such investments currently that are monthly reinvestments that also reclassify the info as a monthly breakdown. I am able in most cases to simply get by with year-end RtrnCap and MiscExp transactions to accommodate the reclassification.

    My hesitancy about supporting your idea is that RtrnCap is already a complex task; adding in a ReinvRtrnCap transaction may be too much. A RtrnCap dollar amount this month has to adjust the cost basis of every lot owned proportional to the number of shares in each lot. Each month you reinvest, you are adding on a lot to that list. And it is not that the actual value of the lot's basis is changing; it is that the program is recomputing that basis whenever needed. The basis of any lot is different on 1/1/23 than on 12/1/22 than on 10/1/21 and so on. That all makes a RtrnCap transaction so much different than a Dividend or Interest transaction.

  • Howard1
    Howard1 Member ✭✭
    edited March 8

    To QuickUserPSP:

    Thank you greatly for your comment. I was indeed careless in my writing. I had the second step as

    "then record the reassigned return of capital as cash income in the "Income" window".

    I meant to write the "Return of Capital" window, but spaced out, and then badly failed to edit myself. The correction has been made in the message, which explicitly describes the second step in the recording as being in the Return of Capital window.

    The point is that the "Return of Capital" window that you have shown does not allow for reinvestment of that capital, only for cash income. Inclusion of a field for Return of Capital in the "Reinvest" window, along with interest, dividends, and capital gains, would turn three steps into one.

    Thank you for catching my error, and providing notification.

  • QuickUserPSP
    QuickUserPSP Member, Windows Beta Beta

    @Howard1 no worries. I touch type so I am thinking of what to write as I type, but sometimes what I am thinking and what I type aren't exactly the same. My fingers have a mind of their own sometimes.

    The other thing you can try is on the Return of Capital transaction, enter the account name in the "Transfer Account" field so that the Account and the Transfer Account are the same. That way no cash is produced from the ROC transaction. So then, then the only adjustment transaction you would need is the Return of Capital.