Update Cost Basis

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Is there a way to increase the cost basis of shares purchased in a mutual fund w/o affecting the # of shares purchased or the total amount.
I exchanged into this fund from the sale of another fund where part of the loss was disallowed due to the wash sale rule, & would like to increase the cost basis of the newly acquired shares.
Using Qkn Premier, R54.9, Spec.ID. I've reviewed "Manually updating the cost basis of an investment" by q_lurker, & J_Mike on 4/2019.
If I remove the purchase transaction, & use add shares, do I then have to remove the cash in the account from the sale of sold fund?
If I use ROC, do I enter the wash sale amt. as positive or negative? Thanks.

Best Answers

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Answer ✓
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    While the method suggested by @QuickUserPSP will increase (adjust) the total cost basis of that security holding in that account, the increase (change) will not be attributed to any specific lot. If you subsequently sell any or all lots, that change will not be reflected in any capital gain/loss calculation or presentation. If you sell all those shares and subsequently look at the holding in that account including the closed lots, that security will be reported as haves a positive or negative cost basis even though 0 shares are owned. I consider keeping that type of information correct to be very valuable and important. YMMV.

    For a wash sale, the adjustment applies only to lots acquired within the +/- 30 day window. It is only those shares that should have their basis adjusted. I recommend doing a Remove Shares for those shares getting their basis changed, followed by Add Shares to add those same shares back in with their correct Acquisition dates and their adjusted basis.

    For a more extensive discussion on wash sales, I suggest this post

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
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    OK, thanks so much, but what happens when the sale of of those shares is reported to the IRS with the different trade date cost basis.

    Your question is not clear to me. As your broker identified and processed the wash sale, I would expect them to now show a basis for those applicable shares different than the original cost of those shares. That adjusted value should be the value they report to the IRS when those shares are sold. In my opinion, you should be making that same adjustment in your Quicken records.

    If you are asking about the 'current' sale that ended up being the wash sale, I'll cite my recent set of transactions.

    • Had 300 shares of XYZ. Bought 600 more shares of XYZ, say for $6,000
    • Within 30 days, sold 450 of those recently bought shares at a loss - say for $4,000 when I had other — therefore wash sale
    • Therefore on date of sale, I did:
      • Remove 600 shares with $6,000 basis
      • Added 450 shares with basis same as sold proceeds ($4,000)
      • Added 150 shares with basis to makeup the difference back ($2,000)
      • Number of shares removed and added unchanged
      • Total basis of shares removed and added unchanged, but the breakdown between the two parts is now different than it was.
      • Sold the 450 shares for the $4,000 == no gain/loss; that is what is currently reported to IRS (I believe)
      • The 150 shares carry forward with a $2,000 basis rather than their original $1,500 basis.

    Hope this helps

Answers

  • QuickUserPSP
    QuickUserPSP Member, Windows Beta Beta
    edited March 16
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    @Allan the easiest way to adjust cost without affecting shares or cash, is to use an "Add Shares" transaction with zero shares.

    In order to enter zero shares, enter .00000001 and then the amount will change to zero. If you need to make an adjustment to reduce cost, just enter a negative amount for Total Cost.

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Answer ✓
    Options

    While the method suggested by @QuickUserPSP will increase (adjust) the total cost basis of that security holding in that account, the increase (change) will not be attributed to any specific lot. If you subsequently sell any or all lots, that change will not be reflected in any capital gain/loss calculation or presentation. If you sell all those shares and subsequently look at the holding in that account including the closed lots, that security will be reported as haves a positive or negative cost basis even though 0 shares are owned. I consider keeping that type of information correct to be very valuable and important. YMMV.

    For a wash sale, the adjustment applies only to lots acquired within the +/- 30 day window. It is only those shares that should have their basis adjusted. I recommend doing a Remove Shares for those shares getting their basis changed, followed by Add Shares to add those same shares back in with their correct Acquisition dates and their adjusted basis.

    For a more extensive discussion on wash sales, I suggest this post

  • Allan
    Allan Member ✭✭
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    OK, thanks so much, but what happens when the sale of of those shares is reported to the IRS with the different trade date cost basis.

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    Answer ✓
    Options

    OK, thanks so much, but what happens when the sale of of those shares is reported to the IRS with the different trade date cost basis.

    Your question is not clear to me. As your broker identified and processed the wash sale, I would expect them to now show a basis for those applicable shares different than the original cost of those shares. That adjusted value should be the value they report to the IRS when those shares are sold. In my opinion, you should be making that same adjustment in your Quicken records.

    If you are asking about the 'current' sale that ended up being the wash sale, I'll cite my recent set of transactions.

    • Had 300 shares of XYZ. Bought 600 more shares of XYZ, say for $6,000
    • Within 30 days, sold 450 of those recently bought shares at a loss - say for $4,000 when I had other — therefore wash sale
    • Therefore on date of sale, I did:
      • Remove 600 shares with $6,000 basis
      • Added 450 shares with basis same as sold proceeds ($4,000)
      • Added 150 shares with basis to makeup the difference back ($2,000)
      • Number of shares removed and added unchanged
      • Total basis of shares removed and added unchanged, but the breakdown between the two parts is now different than it was.
      • Sold the 450 shares for the $4,000 == no gain/loss; that is what is currently reported to IRS (I believe)
      • The 150 shares carry forward with a $2,000 basis rather than their original $1,500 basis.

    Hope this helps

  • Allan
    Allan Member ✭✭
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    It sure does, thanks again.

  • QuickUserPSP
    QuickUserPSP Member, Windows Beta Beta
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    @q_lurker - your method makes sense, but I think its application depends on the situation. If you are simply adjusting the cost of the newly acquired or purchased shares of an investment fund, would you still need to go through your process?

    @Allan - you don't say if you are adjusting the cost on Quicken to match what your financial institution reports. Your financial institution is the "system of record" meaning what they report to the IRS is what stands, no matter how you adjust the cost on Quicken.

    The example I gave was a simple adjustment I use to get rid of the "cost pennies +,-" that remain after a fund is closed. Sorry for the confusion it caused.

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
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    @QuickUserPSP

    I was laying out a process applicable to wash sales where it is desired to a) not have the wash sale report as a capital loss, and b) have the non-reported loss reallocated to the correct lots. Any individual user might want either one or both of those outcomes.

    If "simply adjusting the cost of the newly acquired or purchased shares of an investment fund", I would be more likely to work with the original purchase or add shares transactions to identify the need for the adjustment and make the adjustment there. There are cases where Quicken has somehow gotten off by some few residual pennies positive or negative when all shares have been disposed of. Where I have chosen to make such an adjustment, I have typically used a RtrnCap transaction.

  • QuickUserPSP
    QuickUserPSP Member, Windows Beta Beta
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    @q_lurker - I completely understand. I have been struggling with the best way to make cost adjustments without recreating, reentering, or adjusting transactions. I want my transactions on Quicken to mirror the transactions with my FI as closely as possible which is tricky sometimes because what gets downloaded to Quicken isn't necessarily how the transactions look on statements or online.

    In that respect, I wish that Quicken had the ability to make cost adjustments with a single transaction that had multiple options that fit differing situations.

  • cheesmo
    cheesmo Member ✭✭
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    how do I preserve the cost basis of shares that I transfer from one account to another in quicken, now the shares are "removed from one account and then "added" to other account but then the cost basis gets set to zero for those added shares.

  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
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    @cheesmo You should probably have used the Enter Transactions button, Shares Transferred selection from the old account before accepting the downloaded Remove and Add Shares transactions. The Shares Transferred selection will add shares lot by lot preserving each lots basis and acquisition date.

    (After backing up), you can probably delete the Remove Shares and Add Shares downloaded and then go the Shares Transferred route to get things right.